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Single market exit makes case for construction skills vital

The confirmation that the UK will leave the single market highlights the construction industry’s need to present a united front on skills.

Over the past six months, the UK has seen a wide variety of explanations for what Brexit really means.

First, the prime minister attempted to reassure the UK that “Brexit means Brexit”. Then came the rise of ‘hard’ vs ‘soft’ Brexit, with debate raging over whether the UK would attempt to remain a member of the single market or not, while economists were divided over whether it would be a success.

Just last month, Mrs May added to the myriad of definitions by calling for a “red, white and blue Brexit”.

But last week, she was clearer on what Brexit would mean – and that included leaving the single market. 

The construction industry has heard dire warnings that the weak pound will add to already-increasing cost pressures. Yet of most immediate concern is not so much the economic consequences, but the potential impact that leaving the single market will have on availability of labour.

Workforce still growing

According to data from the Office for National Statistics, there were nearly 2.3m EU nationals in the UK workforce as of Q3 2016.

EU nationals working in UK

EU nationals working in UK

Source: ONS

That figure is more than double the number Q1 2010, when there was just under 1.1m EU workers in the UK, and is 143 per cent higher than it was in Q1 2007.

Even in the quarter immediately following the UK’s vote to leave the EU, the number of EU nationals in the UK workforce rose by 1.2 per cent.

That means there are now more EU nationals working in the UK than there are people working in the construction industry – the ONS’s most recent estimate was that there were 2.2m industry workers, including both employed and self-employed, in Q3 2016.

The industry’s workforce did see a slight decline quarter on quarter, dropping by 1.6 per cent, but the number of people working in construction was still at its third-highest level since Q3 2009 and is 7.9 per cent above the recessionary low point reported in Q2 2013.

The statistics point to two things: that the industry’s demand for workers is still unsated, and that EU nationals are still coming to the UK looking for work – many of them in construction.

So what will the UK’s exit from the single market – and with it, freedom of movement agreements – mean for construction?

Brexit means exit

Freedom of movement is one of the ‘four freedoms’ of the EU – movement of goods, people, services and capital.

Just as those policies underpin the EU, the UK construction market is underpinned by EU workers. This is particularly true in London and the South-east, with the EU contingent on many sites in the capital believed to make up as much as 45 per cent of the workforce in recent years.

Leaving the single market and abandoning freedom of movement could stem the flow of EU workers arriving in the UK to work, and RICS head of policy Jeremy Blackburn warns this could have a severe impact on the industry’s ability to deliver projects. “A loss of access to the EU’s skilled workforce has the potential to slowly bring the UK’s property and construction sector to a standstill,” he says.

“The UK has always been a draw to foreign nationals [and] I can’t see this changing”

Ian Burnett, United Living

Mr Blackburn highlights the need for the government to provide “greater clarity on how we can attract and retain the best global talent” – and that stretches not just to construction workers but also businesses and investors.

“Professional services are at the heart of our economy, and our future growth in this sector is dependent on our ability to import and export such services throughout the EU,” he adds. “London and other major UK cities will struggle to thrive unless we can encourage overseas businesses to invest in and occupy commercial property.”

United Living chief executive Ian Burnett says his firm requires reassurance on what deal the prime minister might get before it can assess the impact. “Across our business, we have a significant number of skilled migrant workers and so we’ve been keen to hear how the Brexit negotiations could affect our UK-wide workforce,” he says.

“It’s important to remember that Theresa May has pledged the UK will retain the greatest possible access to this market… there hasn’t been anything which suggests that EU workers will have to return.”

UK still attractive

He adds that the UK will remain attractive to EU workers, regardless of the exit from the single market, as long as work pipelines remain strong.

Even with cuts to its forecasts, Euroconstruct expects the UK to maintain its position as Europe’s second-largest construction market after Germany, with activity set to recover strongly by 2019.

The UK is also closest of any of Europe’s five biggest markets to its pre-recession high, with Italy, Spain and France all lagging far behind.

“The UK has always been a draw to foreign nationals looking for work and aside from potentially seeing the introduction of a working visa system, I can’t see this changing,” Mr Burnett says.

“A loss of access to the EU’s skilled workforce could bring the UK’s construction sector to a standstill”

Jeremy Blackburn, RICS

The potential introduction of a visa system would undoubtedly require the industry to make itself heard.

Industry sources say MPs have already approached trade bodies and contractors to remind the industry it needs to lobby hard regarding its need to attract skilled manual workers, and argue the case for certain trades to be included in any sort of skilled visa system.

That suggests there is political will to not only recognise the problems Brexit will cause, but also to pre-empt them.

R&D investment

Training within the UK is also becoming all the more important, with even a small dip in EU workers threatening to hit active projects and future pipelines.

The construction industry now makes up 6.4 per cent of the UK’s total workforce, down from 7.3 per cent at the start of Q1 2007, with many workers having moved into other sectors – or at the very least, other sectors having made themselves more attractive than construction.

But part of this shift is also indicative of investment in technology, with research and development set to become even more important when the UK sets out its deal to leave the EU, according to Mace COO for major programmes and infrastructure Jason Millett.

He says Mrs May’s speech provided clarity on what the UK’s future role would be within Europe and its global focus, but added that investment in technology and research would be crucial to the UK’s position on skills.

“Whatever our future relationship with the EU, British construction companies need to invest in R&D so that we can thrive in the UK and increase the export our expertise internationally,” he says.

All this means that, no matter what deal the UK strikes with the EU, the construction industry needs to make sure its voice is heard to get the best deal on skills it possibly can – both for UK workers and those in the EU.

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