Construction needs a new deal, not a no deal

The Government recently issued its Brexit ‘no deal’ analysis – “How to prepare if the UK leaves the EU with no deal”. Whilst various areas and sectors were covered in varying levels of detail, discussion about construction – an industry that contributes around 7% to GDP and employs several million people – was conspicuous by its absence. That said, the Government’s analysis did contain some snippets of relevance for those, including construction contractors, who source goods and materials from the EU – things like fa?ade and cladding materials, mechanical and electrical installations, bathrooms, kitchens and sanitaryware and many thousands of other items regularly brought into the UK by contractors from, or via, the EU. The relevant detail is found in the guide “Trading with the EU if there’s no Brexit deal”.

It’s a fairly long read, but in short, if there’s ‘no deal’ the guide tells us that “free circulation of goods between the UK and EU would cease”. So, instead of buying goods or materials from Madrid or from Munich being much the same process as buying them from Manchester – as it the case now – it will be like buying them from Madagascar.

‘No deal’ means loads of new red tape, a high likelihood of delays getting materials into the UK, and they’ll probably cost more as well. The Government’s analysis lists no less than ten separate steps to take before – and upon – bringing materials into the UK from the EU, including customs declarations, safety and security declarations and inspections. Plus, you may need to pay duty. So expect delay, disruption and cost overruns – these not exactly circumstances the construction industry craves.

The Government also highlights the immediate need to take steps to mitigate the consequences of ‘no deal’. Amongst other things, you should look to acquire software and engage a customs broker, freight forwarder or logistics provider to support you with these new requirements. There’s no guidance as to the cost of these additional measures – but it can reasonably be assumed that it will not be negligible.

The construction industry has had a very rough decade and still hasn’t recovered from the 2008 recession. Margins remain painfully low, risk remains high, fallout from the Carillion debacle and the Grenfell tragedy prevail, the skills shortage is getting worse and competition from new entrants and technology (and new entrants with technology) looms large. Add to that the potential Brexit impact on the pipeline of construction and infrastructure work (given how much of the funding for this originates from EU budgets), and it’s not a particularly rosy outlook for UK Construction. Yet construction and infrastructure can be a catalyst for economic growth. For every ￡1 spent on construction, our economy benefits to the tune of nearly ￡3, with even higher returns for infrastructure projects. 

At a time where even the most ardent Leavers have abandoned their claims of post-Brexit sunny uplands – or at least have said the upside may not be seen for 15 to 50 years – it is critical the Government finds ways to grow the economy. Better Government support for the UK construction industry would be a great way to start. 

The industry needs a new deal from Government, not a ‘no deal’.

[A version of this article first appeared in Construction News magazine – www.constructionnews.co.uk.]