Last week the government issued its Brexit ‘no deal’ analysis.
While various areas were covered in varying levels of detail, discussion about construction – an industry that contributes 7 per cent to GDP and employs several million people – was conspicuous by its absence.
The papers did contain a few snippets of relevance to contractors that source kit from the EU. In short, a no-deal Brexit would mean that “free circulation of goods between the UK and EU would cease”.
So, instead of the purchase of something from Madrid or Munich being much the same process as buying it from Manchester – as it is now – it will be like buying from Madagascar.
Steps to take
No deal would mean loads of new red tape as well as a high likelihood of delays getting materials into the UK – materials that will probably cost more.
The government’s analysis lists no fewer than 10 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.
“Expect delay, disruption and cost overruns – not exactly circumstances the industry craves”
So expect delay, disruption and cost overruns – not exactly circumstances the industry craves.
The government also highlights the immediate need to take steps to mitigate the consequences of a no-deal Brexit. Among 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. So more cost.
Less than rosy
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, given how much construction and infrastructure funding originates from EU budgets, and it’s not a particularly rosy outlook for UK construction.
Yet the industry 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 near-term post-Brexit utopia, it is critical the government finds ways to grow the economy.
Greater government support for the UK construction industry would be a good way to start.
Chris Hallam is a partner at CMS