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Fresh Brexit costs warning issued

The construction industry could fork out an extra half a billion pounds this year on materials due to the impact of the EU referendum, according to procurement giant Scape.

The body’s analysis of figures out this month from the Office for National Statistics showed the net cost of imported construction materials from the EU rose more than 15 per cent to £5.7bn in 2016.

Scape referenced a Federation of Master Builders survey in January which found that seven in 10 small building firms had experienced increased costs as a result of the weakened pound since the Brexit vote.

A further 10 per cent hike in the price of construction materials was expected in 2017, the FMB reported.

Scape said a 10 per cent increase on the £5.7bn spent on materials from the EU last year would equate to an extra £570m in cost.

It added that this didn’t account for the potential impact of triggering Article 50 – expected imminently – or of further Brexit negotiations.

A Scape spokesman said cost rises would be passed on to clients and “act as an additional disrupting factor to the sector”.

“A 10 per cent increase on the net value of imports from the EU would be highly significant,” he added.

“Despite this challenging environment, we must continue to deliver vital built environment projects that support and facilitate growth, which means the industry must again consider where additional efficiencies could be found.”

Construction Products Association economics director Noble Francis pointed out that 80 per cent of construction products used in UK construction were made here. However, of the remainder, 61 per cent come from the EU, he said.

Mr Francis added: “For many imported products such as timber, the business model has developed around barrier-free access and little need to hold stocks.

“After leaving the EU, products will have to be stopped at the border and checked. Also, the drivers will also have to be checked for visas and work permits.

“This means the business model will have to change, but we don’t know how it will change.” 

Scape is just the latest body to warn of the impact leaving the EU could have on the UK construction market.

The Royal Institution of Chartered Surveyors this week warned that more than 175,000 EU workers could be lost from the construction workforce when the UK leaves the EU.

The body said its analysis of official data showed that 8 per cent of the UK’s construction workforce was made up of non-UK EU nationals. The delivery of future projects could be put in jeopardy unless their futures were secured, RICS added.

Last month the mayor’s office released findings that found almost 100,000 construction workers working in London were from the EU – a quarter of the total workforce in the industry in the capital.

The UK’s largest contractor Balfour Beatty, which employs 10 per cent of its workforce from the EU, has warned Brexit could increase skills shortages and drive up costs for firms.

And Lord Stunnell, the man leading a review into the impact leaving the EU will have on the industry, told Construction News in February that the sector’s output could shrink by 9 per cent following a hard Brexit.

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