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OPINION: Materials handling industry is at the mercy of Brexit

Building Specifier caught up with a leading expert in materials handling who warns of the impact Brexit will have on his industry.

Paul Casebourne, who has years of experience in creating engineering solutions and runs the Materials Handling Hub, believes that the industry has been forgotten as one of the potential casualties of the UK leaving Europe.

He claims the industry is already suffering as a result of the uncertainty about the country’s relationship with the EU.

The materials handling industry currently accounts for some of the biggest imports and exports in the UK, with machinery and vehicles accounting for a combined worth of £55b.

Half of this business is done with Europe and Mr Casebourne believes that if it is more expensive to trade with EU states post-Brexit, the outcome could be catastrophic.

He also warned “there are at least two major global materials handling companies who await the results of the troubled Irish Border question where skills are drawn from both sides of the divide.”

“The UK currently benefits from the free movement of goods within the EU. This means imports from other EU member states have no import duties, taxes or customs clearance,” he said.

“More to the point the harmonisation of engineering standards requires representations if we are to keep up with international projects. We currently have EU rights to be included in tenders within the EU, I have heard of no plans to make up ground in this respect.

“Forty years of work in the balance and not a word of comfort from the political structure.”

Casebourne also expressed his concern on the situation in the UK around export and import duties.

“Following Brexit, the UK will be back to custom clearing its EU imports as well as paying taxes and import duties on them and it’s possible that some goods will require an import license after Brexit,” he said.

“The extra tier of administration simply makes it harder to compete and adds unnecessary delays to international trade.

“Companies will have to revert to commercial invoices which determines the import duty they have to pay – all of which can have a huge impact on a business.”

Paul Casebourne

Mr Casebourne believes that while many industries have expressed their concern about what Brexit means now nobody seems to have looked at the impact this will have – and that it is already having – on the materials handling industry.”

Mr Casebourne, who has worked in the industry for more than 40 years and supplies equipment to a range of industries and also creates bespoke solutions, added that “we’ve already seen a number of big projects put on hold and people are reluctant to invest in new equipment.”

“Across the board business is not as good as it could be in the industry and the uncertainty about the future is not helping” he added, who via his Materials Handling Hub website shares best practice and brings together customers and suppliers.

“The whole situation really is intolerable at the moment while we are neither in or out. The UK has launched itself headlong into a 20-year project with no plan B, in fact without any plans at all whilst still handcuffed to the EU, powerless to put the plans in place that we need to get on with investing in our future.”

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Over 600,000 homes lay vacant across England alone

  • New study has found that 605,891 homes were unoccupied last year.
  • Liverpool has the biggest problem with vacant homes, with over 10,000 homes remaining empty in 2017.
  • A third of empty homes throughout the country are empty for longer than six months.

A new study has revealed the shocking extent of England’s empty homes crisis, with more than 600,000 homes remaining vacant.

The study, conducted by Good Move, has found that a third of empty homes are classed as long-term vacant, after being empty for more than six months.

The city of Liverpool takes the crown for the most vacant properties, with a staggering 10,512 properties laying empty last year. The data comes despite efforts by Liverpool City Council to reduce the amount of vacant homes with a free matchmaking service to introduce buyers and sellers of empty homes, in a bid to bring more empty homes into use.

Birmingham follows closely behind, with 10,386 empty homes. The city famous for its Bullring accounts for 17% of West Midlands’ total number of vacant homes.

The Yorkshire city of Leeds has the third highest number of empty homes throughout the country, with 10,263 properties vacant. Leeds’ empty homes equates to 14% of Yorkshire and the Humber’s empty homes.

The North West has the most vacant properties, with 102,847 homes laying empty across the region, and 38% of those being vacant for longer than six months. Liverpool has the most empty homes in the North West, and the country as a whole, with 10,512 vacant properties in 2017.

Following closely behind the North West is the South East, with a staggering 86,693 vacant properties last year. Of the 86,000 empty homes, 29% of those are vacant for longer than six months.

The top five cities with the highest number of empty homes are:

CityNumber of vacant homes (2017)As a % of all housing
Liverpool10,5124.70%
Birmingham10,3862.40%
Leeds10,2633.00%
Durham10,0264.20%
Bradford8,7514.10%


England regions by number of vacant homes:

RegionNumber of vacant homes (2017)As a % of all housingLong-term vacant*
North East43,6173.60%17,106
North West102,8473.20%39,344
Yorkshire & The Humber73,7283.10%27,009
East Midlands52,5622.60%18,553
West Midlands62,9192.60%20,996
East of England58,8312.20%17,983
London62,3661.80%20,237
South East86,6932.20%25,378
South West62,3282.50%18,687
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Government call for green innovations to beat climate change

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Britain’s best innovators and researchers are being invited to pitch their ideas to help tackle the effects of climate change on towns, cities and the countryside as part of modern Industrial Strategy.

Business and Energy Secretary Greg Clark recently announced 4 new research programmes to boost the UK’s resilience to climate change, develop digital environments, promote clean air and investigate how to use our land to boost health outcomes.

The £60 million funding pot was announced during the first ever Green GB Week – a government-led week of campaigning to encourage businesses, communities, funders and academics to renew their efforts to confront the global challenge of climate change.

Business Secretary Greg Clark said “Companies are capitalising on the UK’s world leading position in the greener economy as we transition to a greener, cleaner economy and is one of the greatest industrial opportunities of our time.

“The UK is a world leader in tackling climate change, cutting our emissions more than 40% since 1990 while growing our economy. When you combine Britain’s leadership, innovation and determination it is an unbeatable combination – exactly what our Industrial Strategy and Green GB Week are supporting and encouraging.”

UK Research and Innovation Chief Executive, Professor Sir Mark Walport, said “The recent IPCC report is a timely reminder of the challenges we face in tackling climate change. Storm Callum has highlighted the impact that extreme weather events can have on our communities.

“It is vital that the evidence generated by research is used effectively to navigate and mitigate the effects of climate change, and new technologies are developed to support a move to a low carbon economy.

“The Strategic Priorities Fund is important in supporting UKRI’s mission, allowing us to bring collective expertise from a wide range of disciplines and sectors to bear on addressing important matters affecting all of society.”

The programmes, administered by UKRI, will bring together a broad range of research disciplines, ranging from mathematics and biology to climate science and technology development to:

  • produce better data on climate risks to the UK
  • build a digital picture of our natural environment for greater monitoring and analysis of the impact of climate change
  • cut air pollution and protect vulnerable groups from its effects
  • use our land better, for the benefit of the environment and communities
  • develop ways for the UK to adapt to climate change

Chief Scientist of the Met Office, Professor Stephen Belcher, said “These programmes will allow the Met Office and our partners to make real progress in two areas of significant environmental impact: air pollution and climate change.

“Working together with other world-leading scientists from the UK’s academic community, we will be able to deliver tools and services which will benefit the lives and livelihoods of people across the UK.”

Competitions for the programmes will open in the coming weeks. Researchers and innovators can visit the UKRI website for updates.

The funding comes as part of the Strategic Priorities Fund, delivered by UKRI to drive an increase in high quality multi- and interdisciplinary research and innovation. It will ensure that UKRI’s investment links up effectively with government research priorities and opportunities. Further programmes will be announced in the coming months.

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Builders back the high street

In this weeks Autumn Budget, Chancellor Philip Hammond outlined positive steps that need to be taken in order to address the housing crisis and breathe new life back into our high streets. This is not only great news for the builders who will carry out the works, but also for residents of the countless forgotten towns and cities across Britain, whose people stuggle to make a living and get by on empty high streets dominated by boarded up windows and To Let signs.

Commenting on the Budget 2018, Brian Berry, Chief Executive of the FMB, said “It is important that the Chancellor has recognised the importance of investing in our high streets. He has announced a £675 million Future High Streets Fund to allow councils to rejuvenate town centres. It is estimated that as many as 300,000 to 400,000 new homes alone could be created by making use of empty spaces above shops on our high streets. This is space just waiting to be turned into residential accommodation. There is a pressing need to re-invent many of our town centres in light of changing patterns of retail and leisure. The Government should be applauded for its ambition to safeguard the life of our high streets.”

“We would urge councils to take this opportunity to look again at how they can work with local builders and developers to make better use of existing town centre building, and facilitate the development of wasted space above shops. A recent report titled Homes on our High Streets from the FMB puts councils at the heart of the solution and suggests some practical ways for them to facilitate the development of wasted space above shops. Retail will always be an important element of vibrant high streets, but there is plenty we can do on a small scale to help convert unused and under-used space in to attractive residential units. This will both boost the supply of new homes and help breathe new life back into our high streets. What we must avoid is perfectly good space lying empty and achieving nothing in terms of boosting the local economy or housing individuals.”

“We are also pleased that the Chancellor has today announced £1bn to guarantee capacity to support lending to the SME housebuilding sector. This will be implemented by the British Business Bank, working with Homes England. Many small-scale house builders continue to experience real difficulty in accessing the finance they need to build homes, and it is often the smallest scale builders that experience the greatest problems. This new funding will help to speed up the delivery of homes and lead to a more diverse and resilient housing supply.”

Is your town struggling to survive? Tweet us a picture of your town’s lonely highstreet and copy in @PhilipHammondUK; let’s show the government where this money needs to be spent!
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Autumn budget – industry comment

This week Chancellor Philip Hammond delivered his autumn budget to the chamber. Touching on key issues such as the housing crisis, skills shortages, Brexit, apprenticeships and planning reform, the latest budget included much for the construction sector to sit up and take note of.

The Chancellor has previously promised 300,000 new homes a year by mid-2020s. Will the range of measures signalled in the latest Budget be enough to achieve that ambitious target? Are enough steps being taken to address some of the key issues facing the construction industry? Buildingspecifier.com catches up with thought leaders from across the sector to see what they have to say in response:

Modular construction

Brendan Sharkey, head of construction and real estate at top 15 accountancy firm MHA MacIntyre Hudson, believes that the future of construction is modular . He said “One of the most impactful things Philip Hammond could do to support the industry is to target tax relief at small to mid-tier firms to encourage them to adapt productivity enhancing approaches like modular construction.”

“Modular construction is the future for large parts of the industry, as the government itself frequently tells us. This technique removes the weather from consideration, and brings factory-style efficiency and better quality control into the production process. Larger construction firms already use modular production, but it needs to percolate down the food chain. One way to ensure this happens would be for the Chancellor to put his money where the government’s mouth is, and to offer extra plant and machinery relief for small to mid-tier businesses who want to invest in modular development.”

Infrastructure

Rob Oliver, Chief Executive of the Construction Equipment Association (CEA) commented: “The pre-announced commitment of some £30bn to roads repair and maintenance is extremely welcome. This is not only good news for motorists but will provide an additional boost to the plant hire sector. The hope is that the money will be invested in machines and methods which make those repairs effective long term – not just commissioning low cost, short-term, sticking plaster solutions.”

“The Chancellor specifically recognises that the investment in road, rail and infrastructure is set to power the economy forward. This is good news for the construction industry that is at the centre of this.”

“Interesting to see increased funding for the Transforming Cities programme – up to £2.4 billion. This will help facilitate some long needed local development projects.”

Home ownership

Kevin Roberts, Director, Legal & General Mortgage Club said “The first Stamp Duty exemption has already helped 121,000 first-time buyers. This extension to Shared Ownership properties of up to £500,000 is very welcome news for buyers up and down the country – even better to hear that it will be applied retrospectively for homeowners since the last Budget. The Government clearly recognises the benefits of Shared Ownership as a genuine option for individuals, couples and families who want to become homeowners. Hopefully, this exemption will now bring about even more awareness of the scheme and make it as widely recognised as other high profile tenures such as Help to Buy.”

Refurbishment

In response to this week’s Autumn Budget, specialist insurer Ecclesiastical is urging the government to reconsider reducing VAT on repairs and approved alterations to listed buildings.

Faith Kitchen, Heritage Director at Ecclesiastical said “We’re disappointed the government hasn’t considered reducing VAT on repairs and approved alterations to listed buildings in the Budget.”

“We strongly support organisations such as the Heritage Alliance and the Listed Property Owners’ Club which have argued the VAT on repairs gives an unfair tax advantage to developers and penalises owners of historic buildings, many of whom are private individuals, who are facing higher repair and maintenance costs.”

“As the UK’s leading insurer of Grade I listed properties and with over 130 years’ experience we are passionate about protecting the country’s historic and iconic buildings and structures. Reducing VAT is vital to help organisations and owners of listed properties protect such an important part of the nation’s heritage.”

“We need to do more to support the custodians of Britain’s heritage properties, and while unfortunately this hasn’t been addressed in today’s Budget, we urge the government to reconsider reducing VAT to 5% on repairs and approved alterations to listed buildings.”

Skills gap and apprenticeships

Duncan Green, managing partner leading property, construction and infrastructure consultancy Pick Everard said “I am pleased to hear that Mr Hammond has announced a £695m initiative to help small firms hire apprentices. I believe that apprenticeships for both males and females in construction are crucial to the future of the industry, especially because of the skills gap, and training needs to remain a top priority if we’re to see real change in the UK’s infrastructure.

“Essentially, skills and training are how we will see the high wage, high skill economy of the future.”

Housing

Paul Butterworth, Partner, Ashfords LLP Real Estate Team commented “The problems in housing do not merely mean that someone doesn’t have a roof over their head, but it is vital that other areas which affect those in need, such as mental health provision are also recognised as part of the problem. Therefore, the Chancellor’s specific mention of mental health provision being part of the NHS 10 year plan and the expansion of children’s social care have to be good news in providing funding for support services. There will always be arguments as to whether this is new money or simply filling a hole which has arisen following austerity. It is at least a recognition of the need for a joined up approach to the issues faced by those most in need.

“The £675m “Future High Streets Fund” mentions facilitation of redevelopment for under used commercial into residential property. This is likely to mean a change to allow for permitted development rights, rather like the policy of allowing conversion of offices to residential without the need for a specific planning consent.

“A further £500m for the Housing Infrastructure Fund again underlines the importance of housing and offsetting from developers the costs of infrastructure on major schemes to help unlock housing developments.

“The extension of SDLT exemption on shared ownership properties valued up to £500,000 purchasing a £300,000 share, sorts out an anomaly in the tax system whereby they were caught by an SDLT hit whereas buying 100% didn’t give rise to this. It’s interesting that this is applied retrospectively so is this going to be claimed via the individual tax code.

“All in all a reasonably positive housing budget, not necessarily adding anything new but follows the trend from previous budgets.”

Investors

Melanie Leech, Chief Executive, British Property Federation said “The Government should be careful in how it targets these measures that will be consulted upon in early 2019, as an additional surcharge on large-scale overseas investors could put investment in housing delivery at risk. We estimate that 22,000 build-to-rent homes, 15 per cent of the sector’s pipeline, are reliant on funding from overseas investors such as pension funds. Making it more expensive for these institutions to invest won’t help deliver these much-needed homes.

“A new tax relief for commercial property owners is a real surprise. This move brings the UK more closely in line with the many other countries that already provide tax relief for the cost of building commercial property, making the UK more attractive to invest in. It makes investing in new and refurbished buildings cheaper from a tax perspective, and is a welcome move.”

Planning

The CLA represents landowners, farmers and rural businesses across England and Wales who together, manage more than 10 million acres of rural land. The organisation has reacted to the Chancellor’s Budget.

On Sir Oliver Letwin’s review of build-out rates, CLA President Tim Breitmeyer said “We are pleased the Letwin Review does not remove the financial incentives for landowners to bring land forward for the building of much needed homes.

“However, we are concerned that planning authorities would be given the ability to unilaterally decide where large scale housing development should take place, backed up by the threat of compulsory purchase, irrespective of the wishes of the landowner. Compulsory purchase should only ever be a last resort. The primary focus should be on establishing effective partnerships with local landowners, not seeking to forcibly remove their property.”

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Experts warn that planning system is failing those in greatest need

Councils in the most deprived areas of England are meeting only a fraction of their requirements for affordable housing because the planning system is not set up to deliver homes for people in the greatest need, according to a recent report.

Between 2016-17, Blackpool, Knowsley and Pendle—whose residents take home some of the lowest incomes in the country—saw no new affordable housing delivered through the planning system and less than 7% of their requirement met by other means. On the other end of the spectrum, affluent areas including the Vale of White Horse were able to deliver 96% of their affordable housing using the planning system.

The planning system is one of the main drivers for delivering affordable housing in England, with 70% of councils saying they rely on it substantially to allow them to meet housing need. Local requirements for affordable housing are usually set as a percentage of overall housing delivered on a scheme. Councils have said deprived areas are being left behind by the current system because only high-value areas can meet developers’ profit expectations and still deliver affordable homes.

Figures show that although over half of councils have set a minimum threshold for genuinely affordable housing using their local plans, only 2% actually manage to achieve it.

Developers have traditionally managed to bypass local requirements for affordable housing by first submitting a scheme that meets the threshold, but later backing out of their commitment, claiming unworkable profit margins. The government attempted to address this problem earlier in the year by restricting the use of viability testing to only ‘particular circumstances’, although councils aren’t convinced that this will curb the problem. One official claimed that the changes will simply create new issues, which local authorities will struggle to react to.

The report also finds that councils often specify much lower numbers of affordable housing in their local plans than necessary because they believe that setting a level which meets their true requirement would deter developers from investing in their areas. This has seen deprived areas setting their target as low as 5% of new affordable housing—when the actual need is sometimes as high as 84%­—but still seeing no new homes created for lower-earning residents.

Planning for Affordable Housing, which was funded by the Nationwide Foundation, makes a series of recommendations about what needs to change to the planning system to deliver more affordable housing for people in need across the country, and highlights the critical role that innovative councils are playing to secure more affordable homes.

Henry Smith, projects and policy manager at the TCPA, said “Although housing costs are often lower in more deprived areas of the country, they’re still out of reach for many local people. This research shows that the housing crisis truly is a national problem and not only limited to major cities and those living in the south east.

“Councils are being put in a difficult situation where they’re forced to furiously attract development to meet a five-year target imposed on them by the government, but at the same time negotiate with developers to make sure that what is actually affordable to people most in need.

“Many councils are responding to these difficult circumstances by acting in new and innovative ways, such as fast-tracking planning applications—considered a barrier by many developers—for schemes which meet higher levels of affordable housing. However, to truly make a dent on these numbers the government needs to immediately increase grant levels for councils and housing associations to enable them to deliver genuinely affordable homes. It is also essential that the government creates a definition of affordable housing, which links affordability to income and people’s ability to pay, rather than an arbitrary portion of the market rate.”

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Infrastructure and housing workloads keep UK construction sector buoyant

Workloads continue to grow in the UK construction and infrastructure sector, amid financial constraints and Brexit uncertainties, according to the results of the Q3 2018 RICS UK Construction and Infrastructure Market Survey.

RICS UK Construction and Infrastructure Market Survey, Q3 2018: Outcomes

  • Workloads continue to rise across all sectors and geographic regions
  • Infrastructure activity reaccelerates in all parts of the UK apart from Scotland and Northern Ireland, led by rail, roads and energy
  • New business enquiries and hiring increase despite tightening credit conditions

In Q3 2018, 20% more chartered surveyors reported that their workloads had risen rather than fallen (up from +15% in Q2). Unsurprisingly, given the recent support from Government, private housing and infrastructure workloads reported the strongest rise. Private housing workloads improved in Q3 with 30% more respondents reporting a rise rather than a fall, up from +25% in Q2. Meanwhile, the infrastructure sector also continued to strengthen this quarter, with 22% more respondents reporting a rise in workloads.

Looking at the infrastructure sector in more detail, rail, roads and energy are the subsectors expected to see the strongest growth in output over the coming twelve months. Following the go-ahead from Government on major projects such as HS2, Heathrow expansion and Hinkley Point C it is likely that these projects are underpinning the growth as work starts to get underway.

Meanwhile, activity across the private industrial and public non-housing categories improved modestly with net balances of 9% and 11%, respectively. A soft patch was most observable in public housing where the pace of workloads slowed from +12% to +7%.

Jeffrey Matsu, RICS Senior Economist said “hile ongoing capacity constraints have supported steady workload activity, the outlook going forward is far from clear. Recent Brexit-related indecision has added considerably to this uncertainty, but whatever the outcome, the pace of growth is expected to decelerate if only due to cyclical market conditions.”
Regionally, workloads are now reported to be increasing across all regions, with notable acceleration in the Midlands and East. The pace of private housing activity was strongest outside of London and the South East whilst Scotland and Northern Ireland saw the industrial and infrastructure sectors contract.

Despite the growth in recent workloads, financial constraints are reported by 75% of surveyors to be by far the most significant impediment to growth. This is down slightly from 80% in Q2. Anecdotal evidence suggests the difficulties to accessing bank finance and credit, along with cash flow and liquidity challenges are the main reasons for hampering current growth. Cyclical market conditions are also making an impact. In an additional question introduced this quarter, respondents were also asked how credit conditions have changed over the past three months. 12% more respondents reported a deterioration rather than improvement, with them expecting this to worsen over the next three and twelve months.

Near term, the outlook for the sector remains upbeat. Respondents have reported growth in the number of new business enquiries received and 42% more respondents have reported seeing more new hires in their company over the last three months.

However, the outlook for the economy as a whole has led to a reduced optimism for the construction sector over the year ahead, with respondents pointing to a softening in growth. 33% more contributors expect activity to rise rather than fall, down from 41% in Q2, and a net balance of 25% foresee an increase in hiring. As the pace of growth has broadly moderated, since 2014, anecdotal evidence suggests that the uncertainty generated around Brexit, as the date to exit draws closer, is the main reason for the relatively cautious outlook.

Brexit caution could also be a reason for the reported rise in tender prices, as +61% and +50% more respondents continue to envisage greater price pressures in the building and civil engineering areas, respectively. This is up from Q2 and continues to signal rising input costs and shrinking profit margins for businesses. Indeed, expectations for profit margins remained flat in the latest results.

Hew Edgar, RICS Head of Policy concluded “Despite challenging market conditions and Brexit looming, overall construction output in the UK is up on the second quarter of the year, and in particular it’s very positive to see that workloads for much needed new homes and infrastructure are increasing. For three years our respondents have highlighted workloads rising in private housing, however whilst driving the growth in construction, the UK is yet to reach Government’s target of 300,000 new homes per annum. The last time the UK built more than 300,000 new homes per year was in the 1970s when council houses accounted for around half of the total. Hopefully, this is set to change following the announcement to lift the Housing Revenue Account borrowing cap, which should encourage more local authorities to get back into building.

“We’ve long called on the government to secure funding to ensure Britain’s exit from the European Union doesn’t impact the delivery of vital infrastructure schemes, and encouragingly our latest survey revealed that rail, roads and energy are the subsectors expected to see the strongest growth in output over the coming twelve months, unsurprising given recent announcements in these sectors.”

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There are still many danger’s in the construction workplace.

From the 22nd – 28th October the European week for safety and health at work will focus on the prevention of risks posed by dangerous substances within the workplace.  In the UK 8,000 people die due to exposure of carcinogens at work and 13,500 new occupational cancer cases are registered in the UK.

Our industry accounts for the single largest number of occupational cancer cases with approximately 3,500 cancer deaths and 5,500 new cancer registrations each year in Britain.  The main factors involved in this are past exposure to asbestos along with exposure to silica, solar radiation, welding fumes and other contributing factors.

The European Agency for Safety and Health at Work’s (EU-OSHA) aims to reduce the exposure of workers to dangerous substances as outlined in their document ‘Healthy Workplaces Manage Dangerous Substances’.

“Protecting workers from exposure to carcinogens is one of the key challenges for occupational safety and health in the 21st century. We are working to highlight the scale of the problem and the importance of preventing exposure to carcinogens at work as part of our current campaign. We believe that by informing and educating workers and employers, as well as offering practical solutions, we can reduce and even eliminate exposure to carcinogens at work, thereby preventing needless suffering and deaths from cancer. said Christa Sedlatschek, Executive Director of the European Agency for Safety and Health at Work (EU-OSHA)

Although use of some of the most dangerous substances, such as asbestos, are now banned or strictly controlled, modern workplaces continue to expose workers to dangerous agents, such as highly toxic liquids and chemicals, as well as nanomaterials, the health risks of which are not yet fully understood but predicted to be even greater.” said David Parr, Policy and Technical Services Director at the British Safety Council.

“The most effective way of managing exposure to dangerous substances in the workplace is the creation of a risk prevention culture. When this happens, workers are pro-actively involved in risk assessment processes and are well informed about the dangers, as well as the control measures that can be taken to prevent or control them.

“Occupational exposure limits (OELs) for hazardous substances laid down in European OSH directives are crucial for the protection of workers’ health. With Brexit growing increasingly imminent, it essential that the well-established control regime relating to this issue is not compromised in any way by the UK’s withdrawal process”

The British Safety Council has been working with employers and decision makers for over 60 years.  Their vision is that no-one should be injured or made ill at work and they are delighted to be supporting EU-OSHA’s campaign through there monthly magazine ‘safety management’.

 

 

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Construction and EU procurement in No-Deal Brexit

In nearly six months’ time, on 29 March 2019 at 11pm UK-time to be more exact, the UK is expected to leave the EU.

The construction industry has already started to feel the impact of Brexit, and has ongoing concerns about, amongst other things, skill and labour shortages, the increasing price of materials, potential import and export tariffs.

Another area of concern for the construction industry has been how the system of advertising UK contracts for works, goods and services to EU companies would work post-Brexit and how businesses in the UK construction industry would be able to continue to bid for work, goods and services in Europe. This is important because many UK construction and consultancy businesses benefit and need to continue to benefit from smooth and open working relationships with EU businesses.

The government’s position

While the government continues to negotiate with the EU, in the hope of reaching agreement on a number of key points in the next few months, it is also starting to prepare for a “no-deal Brexit”.

As part of that, a couple of weeks ago the UK Cabinet Office released guidance entitled “Accessing public sector contracts if there’s no Brexit deal” which sets out how works, goods and services can continue to be accessed across the UK and EU in the event of the UK leaving the EU without an agreement in place.

The current system

At the moment, UK public bodies and authorities can procure certain works, goods and services for construction projects, including from EU businesses, by advertising them on the Official Journal of the European Union (OJEU) via Tenders Electronic Daily (TED). Equally, UK contractors, consultants, manufacturers and other construction businesses can bid to provide works, goods and services to EU public bodies through OJEU via TED.

This means that, for example, a UK public authority procuring specialist offshore trenching and vessel services for a government-funded offshore renewables project can receive tenders from specialist construction companies throughout the EU. It also means that UK companies, for example a UK architectural business, can tender for a commission to design a high profile development project in Spain on the same basis as companies based in other EU member states.

But post-Brexit, without a deal, this position would change.

The government’s guidance

There are two key messages in the government’s guidance “Accessing public sector contracts if there’s no Brexit deal”:

First, the UK is aiming to accede to the World Trade Organization (WTO) Agreement on Government Procurement (GPA). The GPA is an international trade deal that the UK currently participates in by virtue of its EU membership, but in a No-Deal Brexit world the UK will need to become a member itself. Whilst this is not a new position it does confirm that there has been no change to the government’s position on the need to seek GPA membership.

Second, the UK will develop a UK version of OJEU / TED, which it refers to as “a replacement UK-specific e-notification service”. The guidance states that:

  • UK-based contract opportunities would no longer be advertised to the EU on OJEU / TED and would instead be advertised on the new replacement UK-specific free-to-use e-notification service
  • This UK e-notification service will be available from “Exit day”
  • The requirement to advertise and ability to access other UK domestic systems will remain eg on Contracts Finder, MOD Defence Contracts Online, Public Contracts Scotland, Sell2Wales and eTendersNI
  • UK businesses who wish to tender or bid for EU contract opportunities may continue to do so via OJEU / TED and
  • To enable the above, some changes to how the current procurement rules operate may be necessary, and these will be made by amending existing UK legislation.

The government has also said that further information will be provided nearer to the Brexit date.

So, has the government provided clarity?

In part, yes. The government has at least given some insight into its thinking about how works, goods and services can be advertised and procured across the EU in the event of a No-Deal Brexit.

However, there is very little detail around how this will work in practice.

In particular, while the guidance says that “Suppliers who wish to access contract opportunities from the EU may continue to do so via OJEU/TED”, it is not clear whether this position would be agreed to by the EU or whether they would have to access OJEU/TED as third country participants.

UK public authorities, construction companies, construction industry professionals and other construction industry businesses may also be concerned that, during a period in which they dealing with other challenges that may arise for their businesses due to Brexit (such as skill and labour shortages), they will potentially also have to familiarise themselves with a new UK e-notification service.

One thing is clear though, with no agreement yet reached with the EU, and with the Brexit date looming in a matter of months, the government should be working hard behind the scenes to flesh out its guidance, to provide certainty for UK public authorities and the construction industry before 29 March. We would hope to hear more on this by the end of this year.

 

Guest post written by WBD UK Lawers Kathrine Eddon, Head of Public Procurement and Michelle Essen, Managing Associate in Construction.

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