Brexit: Impact on the South West Construction Industry
"If 2016 is when we saw Brexit, 2017 will be the time when we see the consequences of it"
Last week The Association of Women in Property and CIBSE South-West held a joint event on BREXIT and the impact on the south-west construction industry. Attended by over 100 people, and kindly hosted by ARUP, the evening was full of insightful questions and expert opinion. The panel was chaired by Peter Bull, Director at ARUP and the expert panellists were:
Hywel Davies, Technical Director, CIBSE
Jo Davis, planner and Senior Director Bilfinger GVA
David Gascoigne, Managing Director at pensions specialists Trigon Ltd
Mark Alker Stone, Architect and Director at AWW
As we are frequently finding, the issue of the skills gap dominated conversation. Better training for young people is just the start. Jo Davis explained how it is an issue everyone working in construction needs to address in order to find a solution. Not only do we need to consider young people but also how to change the cycle of people aged 30-40 of all genders who become disillusioned with construction. Hywel Davies remarked that encouraging new employees of both genders, as well as retaining people, are both issues we can do something about with the right proactive attitudes. And when so much of the issues around Brexit are out of our control, it is essential we do face head-on anything that we have control over. As well as existing skills shortages, the construction industry may have to deal with further issues around non-UK nationals if Brexit policy dictates. Mark Alker Stone reiterated that 10% of the construction workforce was born outside the UK, and it isn't always the case that these are the lower paid, unskilled labourers - indeed on Hinckley they are very highly skilled specialists. So replacing such skills if Brexit brings about restrictions on non-UK workers will not be a quick or easy process.
It is this level of uncertainty that is hitting the construction industry hardest, slowing growth and investment as David Gascoigne explained "we do not know what the landscape looks like, so investors are waiting to understand the landscape before making any decisions. If 2016 is when we saw Brexit, 2017 will be the time when we see the consequences of it". Owing to the uncertainty around this sector, rising inflation and collapse of the Sterling, investment has dropped massively. 64% of materials are procured from the EU therefore it is inevitable the currency issues we are facing will affect projects across the board and cross over into the labour market as well. As Jo Davis highlighted, deals being announced now were done prior to Brexit so these are not really an indicator of investment health post the Brexit vote. David Gascoigne remains optimistic that a positive outcome might be possible through overseas investment into the UK increasing owing to the fall in the value of Sterling. However investors are nervous, and projects with long term lets and indexation links are being considered safer havens for investment. This doesn't solve the issue that inflation will have an impact on construction costs. As Mark Alker Stone explained, contractors are already concerned when asked to tender for large projects not being let for 12-18 months owing to this level of uncertainty around inflation. Inevitably this will also lead to prices increasing.
Hywel Davies reassured the room that the government has neither the time nor the money to re-write the 40,000 plus pieces of legislation in existence, and so a lot of the laws around the Climate Change Act, EPCs/SAPs, Building Regulations etc, will remain as is. The same applies to the majority of planning law, which is and always has been in the control of the UK government. One area that could hopefully change is the waste laws from the EU, which create barriers to reusing construction materials, so could have a positive outcome on cost and productivity if altered. Another positive outcome could be that procurement will not have to be via OJEU, which Jo Davis interprets as paving the way for more SMEs, or public and private sector partnerships. We are all well aware of the tightening belts in the public sector, and the delays that come hand in hand with local government. Therefore we need to be consciously looking to other partnerships for projects that have realistic expectations of moving forwards. That is not to say the government cannot do its part to help - indeed all the panellists agreed infrastructure is going to be critical moving forwards, and that is something which the government does have funding for. David Gascoigne explained that the Chancellor's 'Housing Infrastructure Fund', which is £2.3bn to deliver infrastructure to 100,000 houses in areas of high demand will be a positive outcome. The government acknowledge they need to increase growth and are trying to think of ways to stimulate this. However, this alone is not going to create sufficient positive outcomes for the construction industry. As Mark Alker Stone summarised, "we need to be innovative and smart". That means considering waste reduction, better use of technology, and better use of offsite construction. And thinking outside the box in all those areas. So offsite does not need to mean panels built in a factory a few hundred miles away, it could mean whole houses built a few thousand miles away in China, or skills outsourced across the world using BIM technologies.
Whether the proposal that the UK needs to consider purchasing more products & skills from other countries in order to successfully feed its own construction industry will also in turn be detrimental to the manufacturing industry of the UK will remain to be seen. What is obvious though is that we all need to keep our eyes and ears open to the announcements of the government plans for Brexit which may even start filtering through this week, and be ready with an action plan.
Written by Rachael Sherratt, Associate Director, Noma Architects – on behalf of Women in Property South West