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One year until Brexit: How is construction preparing?

EU referendum Union Jack European Union flags Brexit_shutterstock_389256961

Construction News speaks to the FMB, CITB and CPA about what they’re doing to prepare the industry for Brexit and the steps being taken by their members.

It is now 12 months to the day since the UK triggered Article 50 of the Lisbon Treaty, putting into motion the 24-month countdown for the country to negotiate its exit from the EU.

Progress at the negotiating table between Brexit secretary David Davis and EU chief negotiator Michel Barnier has been slow, but common ground has been found in certain areas. We now know where British and EU citizens stand, there will be no hard border between Northern Ireland and the Republic of Ireland, and a 21-month transitional period will begin after the 29 March 2019 exit deadline.

Progress on the biggest areas concerning business, however, has been elusive. The UK’s access to the single market, its membership of the customs union, and the post-Brexit immigration landscape are all yet to be determined.

Construction News has spoken to the FMB, CITB and CPA about their primary concerns and what they and their members are doing to prepare for Brexit. 

Sarah McMonagle director of external affairs FMB

Sarah McMonagle director of external affairs, FMB

Sarah McMonagle, director of external affairs, FMB

On the FMB’s Brexit concerns

Things have moved on since the FMB’s Construction Industry Brexit Manifesto was published and some of the points have now been realised. We now have clarity around the settled status issue, which is brilliant.

What we’re concerned about is that this wasn’t necessarily picked up as widely as it could have been. One of the recommendations in the manifesto was to also communicate that effectively.

We think the government should really be embarking on a communications campaign because anecdotally, our members are telling us that EU workers are already leaving the UK either to go back to their country of origin or to find work elsewhere in Europe.

The reasons for that could be financial, with the depreciation of the pound since the referendum, or it might be an issue of how they feel about living here since the referendum, and maybe not feeling as welcome as they once did.

We’d like to see the government step up and put out a really positive message about why we need our EU workers, how valued they are, how they’re welcome to stay here, and how important they are to the economy and society. But it’s not really happening.

They can announce policies but if they’re not widely known about, it’s not going to have the impact it could.

What the FMB’s members are concerned about

They really want to know what the post-Brexit immigration system is going to look like.

Contractors and employers are upping the ante in terms of training. The extent to which they need to do that will depend on what the post-Brexit immigration system looks like. We suspect it might not be as easy to employ EU migrant workers a few years down the line, but we don’t know to what extent.

“76 per cent say it would have a negative impact on their business if their EU workers left the UK now or post-Brexit”

With any business, planning is really important and there’s this idea that small businesses are hand to mouth and they think from one month to the next, but that’s not the case. Our members are telling us they would like to know a lot more and they need to know a lot more about what Brexit is going to look like.

Just talking about the positive message idea, we’ve done some research as part of our Q4 2017 State of Trade survey, which showed that 94 per cent of our members describe the quality of their EU workers as good or very good, and 76 per cent say it would have a negative impact on their business if their EU workers left the UK now or post-Brexit.

This just underlines what we already knew, which is that EU workers are highly valued by construction.

What the FMB is doing to prepare the industry for Brexit

The FMB is heavily involved in apprenticeship standards delivery and T-level development. If we get both of those right, we stand a good chance of significantly increasing domestic training in this country.

But the quality needs to be right and with the T-levels, we think there is a big sticking point. The work placement requirement means if you’re going to do a T-level, you can’t even enrol with the college until you can demonstrate you’ve got at least three months work experience with an employer.

We know the construction industry isn’t massively enamoured with the idea of offering work placements because of health and safety reasons and insurance – a 16 or 17-year-old working in a shop for three months is one thing, but working on site with very little onsite experience is another. They need to be supervised almost constantly to ensure their safety.   

One of the things we’re lobbying for is for the Department of Education to consider using some of the apprenticeship levy fund to incentivise employers to offer work placements, which we think will help encourage more of them to come forward.

At the moment there’s little incentive but we’re selling it to our members as a sort of ‘try before you buy’ arrangement. If you’re thinking about hiring an apprentice this could be a good way of testing a young person before you take them on through a formal apprenticeship.

What the transitional agreement means for the industry

In the manifesto, as an industry we agreed that we needed at least two years; so again, the agreement is a tick from our perspective.

We know that’s its two years, which is good. And we know that workers arriving within that window will be able to apply for permanent residency, which is good as well. 

Steve Radley director of policy and strategic planning CITB

Steve Radley director of policy and strategic planning CITB

Steve Radley, policy director, CITB

On the role the CITB is playing

The first thing we’re doing is to really present evidence to government about why the industry needs migrant workers.

Second, we’re working with industry to develop its skills, retention and recruitment approach to Brexit. And third, in a very much supporting role, we’re looking at what a future migration system might look like.

Our view is we know it’s going to happen, we’ll hopefully have the transition which has been agreed in principle and gives us a bit more time to prepare, but we need to start thinking about what the migration system might look like in the future, and help the industry develop its response to it.

What makes this really complicated, apart from the obvious point that whatever is agreed is going to be more restrictive than it is now, is that it’s very difficult to second guess what the new system will be.

“We have to think about ensuring companies put measures in place so that migrant workers want to remain working in the industry”

I think you have to start from a number of assumptions, such as there will be fewer people coming in to work in Britain in the future. At the lesser skilled end it will probably be more difficult, and the process will be more expensive and time-consuming for employers.

Another point to emphasise is that there are a lot of migrant workers here already and based on the research we did last year, a lot of the respondents said their intention was to remain within the construction industry in Britain for the next 12 months, and a lot of them want to stay beyond that.

So we also have to think about ensuring companies put measures in place so that migrant workers want to remain working in the construction industry. The government said just before Christmas it would be putting a system in place that will be simple for people already here to be able to register and have that right to remain.

Brexit’s impact on the availability of skills and labour

It sometimes gets a bit exaggerated that if you look at a London building site, almost everyone working there is from abroad – that might in some cases be true but across the industry it is more like one in every eight. That is significant, but it’s not out of line with quite a lot of other industries.

What we’re looking at is how we can grow more of our own over the next decade.

How can we bring more people into apprenticeships; how can we ensure they complete it; how can we make sure more people who choose further education end up joining the industry; are there ways to prolong people’s working lives – perhaps by doing something different in construction?

We also need to really start to attract women and people from ethnic minorities, and think about people from other sectors with transferable skills and investing in them through conversion courses.

It’s about looking at all the possible ways to bring more people into the industry and retain them.

Another point is: how can we have a more effective work experience offer? There’s an opportunity there with T-levels that are coming in from 2020, and that’s looking to bridge the divide between the academic and employer route, where you do an apprenticeship on site.  

How the CITB is helping industry prepare

We’re looking at how to really drive forward modern methods of construction and improve productivity. We’re not just looking at the potential and what would industry buy into, but also the circumstances that would help you get there.

“Many companies are thinking that the problem is so complicated and the future looks so unclear, that it’s hard to come up with a viable solution at the moment”

On migration, if industry is going to make the case to government about what the system should look like, industry needs to come up with a convincing plan of how it’s going to recruit and retain more of its own workforce domestically.

It’s going to be a bit of a ‘something-for-something’ deal, and certainly industry can be working very hard on its part of the bargain while the government decides how it’s going to operate in future.

On the steps member organisations are taking

At the moment, the majority of the industry would be looking for the CITB or their trade associations to provide the leadership.

Many individual companies are thinking that the problem is so complicated and the future looks so unclear, that it’s hard to come up with a viable solution at the moment.

What the transitional agreement means for the industry

It will be helpful. I think the transitional period will probably be more important to other sectors of the economy, particularly those that trade a lot with Europe and those with European supply chains. 

The agreement is also important because it suggests the system in terms of migrant workers from the EU will remain as it is until the end of the transition period.

It’s useful in terms of giving the industry greater breathing space to adjust and put its plans in place. But it’s agreed in principle at the moment, just like the rights of people who are already here to stay. Nothing is agreed until everything is agreed, which is pretty much the approach of the whole new relationship with the EU.  

Diana Montgomery chief executive CPA

Diana Montgomery chief executive CPA

Diana Montgomery, chief executive, CPA

On the effect the Brexit process has had on the industry so far

Following the Brexit referendum there were significant depreciations in sterling and that has raised import prices.

Most materials and products used in UK construction are made here, but for the 20 per cent that are imported, there have been cost increases.

“It is difficult to justify investment in changing their business unless they know what the market and trading environment will be like post-Brexit”

In addition, manufacturers have continued day-to-day investment but major investments where the return is long term, such as new factories, are hard to justify. This is particularly the case when most of our major companies are globally headquartered, so the business case for new investment needs to be made in comparison with investing in other countries, where growth may be stronger and there is less uncertainty.

How the CPA’s members are preparing

Members continually highlight the need for access to labour, trade and regulatory alignment on construction products.

CPA members are looking at the different options for sourcing parts and products, but it is difficult to justify investment in changing their business unless they know what the market and trading environment will be like post-Brexit.

On the CPA’s ability to help its members prepare

The CPA has focused on working with the different government departments and industry to highlight the key issues. As a result, CPA members had been working on the assumption of a two-year implementation period from our forecasts until last year, when the EU stated that it was likely to be 21 months.

The lack of clarity from government publicly has made it essential that we work with government to understand how it sees the issues internally. Also, ensuring our members have the most recent robust evidence and information helps them to prepare as early as they can.

What the transitional agreement means for the industry

It is good that the implementation period has been agreed, but it just pushes back the key issues regarding Brexit. We have effectively just kicked the can down the road. 

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