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What a ‘no-deal’ Brexit means for builders

A ‘no deal’ Brexit could result in soaring material prices and lower workloads and enquiries, according to the latest research from the Federation of Master Builders (FMB).

When asked about the impact of a ‘no deal’ Brexit: Key results from the research include:

  • Over half (53%) say it would result in higher material prices;
  • Just under a third (29%) say it will lead to lower workloads and enquiries;
  • Just over a quarter (26%) say it would result in less access to skilled workers.

When asked how best the new PM could prevent an economic downturn later this year, the top five interventions cited by construction SMEs were the following:

  1. Reduce VAT on repair, maintenance and improvement (87%);
  2. Make more money available through Government funding schemes aimed at SME house builders, such as the Home Building Fund (36%);
  3. Reform the Apprenticeship Levy so more SMEs can train apprentices (36%);
  4. Invest funds in local authority planning departments to speed up the planning process (30%);
  5. Embark upon a national programme of social house building (25%).

Brian Berry, Chief Executive of the FMB, said “As the Conservative leadership contest rumbles on, construction SMEs are worried about the potential impact of a ‘no deal’ Brexit, which would have immediate and potentially disastrous consequences for the construction industry. Material prices are the biggest cause for concern – widely-used building materials such as timber are largely imported and any disruption to that would lead to soaring prices and delays to construction projects. More broadly, a significant proportion of construction SMEs think that a ‘no deal’ Brexit would result in lower workloads and enquiries as confidence in the economy might wobble as people abandon plans for new projects until the UK is on a steadier footing.”

“However, the next PM has it in his gift to guard against any potential economic downturn by stimulating activity in construction and house building as soon as he gets the keys to No.10. Construction SMEs believe that the best way to do this would be to slash VAT on housing, renovation and repair work from 20 per cent to 5 per cent, which would help tempt homeowners to finally commission the home improvement projects they’ve been putting off due to Brexit-related uncertainty. This would give a much-needed boost to the construction sector and the wider economy. The next PM should also make more money available to SME house builders through government funding schemes and stimulate apprenticeship training through fundamental reforms to the Apprenticeship Levy. Once elected, the new PM has a responsibility to steady the economy. There’s no better way to do that than investing in construction and house building, which would boost economy.”

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English councils to receive over £50 million for Brexit preparations

Local authorities across England will receive a share of £56.5 million to help support their preparations for Brexit.

The Treasury announced in December that MHCLG would receive £35 million to prepare for Brexit. MHCLG has now added an extra £21.5 million funding using finance from its 2018 to 2019 budget.

Councils will receive £20 million this financial year (2018 to 2019) and £20 million in 2019 to 2020 to spend on planning and strengthening their resources.

A further £10 million will be available in the next financial year (2019 to 2020). This funding is intended to help local authorities with specific costs which may arise following Brexit.

£1.5 million will be allocated in 2018 to 2019 only to local authorities facing immediate impacts from local ports, with the decision on the allocation and distribution of that funding to be announced shortly.

A further £5 million will be split by teams in the Ministry of Housing, Communities and Local Government, local authorities, and Local Resilience Forums for specific purposes such as strengthening preparations and supporting communities.

The funding will help councils to adapt to the changes caused by Brexit, ensuring their local authority is prepared ahead of 29 March, whilst also protecting vital local services.

Councils will decide how to allocate their funding. It is expected that money will be spent on resources like recruiting extra staff to ensure councils have the capacity to provide timely and accurate information to residents who have questions on how Brexit will affect them.

Communities Secretary Rt Hon James Brokenshire MP, said “Local authorities have a critical role to play in making a success of Brexit in their areas.

“I’m determined to ensure councils have the resources they need, which is why I’m releasing £56.5 million of extra finance to help them to deliver essential services and keep residents well-informed.

“I will continue to work closely with local leaders to ensure they are prepared to respond to any Brexit scenario.

“This funding will not be the only resource councils receive from central government to fund Brexit costs. The government has been clear that departments will assess and, if appropriate, fund any potential new requirements of councils as part of EU Exit work they are undertaking.”

The Secretary of State will also continue to engage with the sector through the EU Exit Local Government Delivery Board and regular communications with stakeholders across the sector.

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Construction bosses fear EU workers won’t return to UK after Christmas

The UK construction industry is asking its highly valued EU workers, who might be travelling home for Christmas, to please come back after the Christmas break, according to the Federation of Master Builders (FMB).

Research focusing on how the bosses of small and medium-sized (SME) construction firms view their EU workers concluded that:

  • 85% of construction SME employers that employ EU workers say that these workers are important in allowing their business to maintain and expand its workforce
  • 76% of these firms say it would have a negative impact on the health of their business if any of the EU workers they employ returned to their country of origin, now or post-Brexit
  • 94% of firms describe the quality of EU workers they employ as ‘good’ or ‘very good’

Brian Berry, Chief Executive of the FMB, said “Our research shows that EU workers are vital to the success of the UK construction industry and our message to these individuals is clear – you are highly valued and we need you. Christmas is now upon us and there’s a risk that those EU migrant workers who go home to their home countries for the festive period might not come back. With Brexit looming large on the horizon, EU workers in the UK are facing high levels of uncertainty over their future. Furthermore, since the depreciation of sterling, their wages aren’t worth as much as they were previously. Construction employers are genuinely concerned that this mixture of uncertainty about the future and less money in their pockets will make the UK a much less attractive proposition that it was pre-referendum.”

“Ministers haven’t done enough to reassure EU workers that they have a future in the UK. In our ‘Construction Industry Brexit Manifesto’, seven of the major trade bodies have called on the Government to embark upon a communications campaign that makes clear to our EU workers that they’ll have no serious impediments to gaining settled status. Indeed, both the Government and the industry need to do all that they can to put a positive message across. In the medium term, the construction industry can and should do more to attract and train a greater proportion of domestic workers. However, such is the extent of the current construction skills shortages, we’ll continue to need to draw upon a high number of EU migrant workers post-Brexit if the Government wants to meet its target for new homes and infrastructure projects.”

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Sharp fall in migrant workers shows UK is already changing ahead of Brexit

The UK labour market is already changing ahead of its exit from the EU as the number of EU migrant workers fell rapidly over the last year, according to the latest labour market figures compiled by The Resolution Foundation

The figures show that the number of EU migrant workers in Britain fell by 4.5 per cent (107,000 workers) in the year to September 2018 – the sharpest fall since records began in 1997.

Britain’s pay recovery is gathering momentum too, with nominal pay growing by 3.2 per cent in the three months to September. This is the strongest growth since December 2008, though still well below the pre-crisis average of over 4 per cent. Above-target inflation means that real pay grew by just 0.9 per cent.

Stephen Clarke, Senior Economic Analyst at the Resolution Foundation, told buildingspecifier: “The sharp fall in EU migrant workers over the last year shows that Britain’s labour market is already changing ahead of its exit from the EU, and long before its post-Brexit migration plan is in place.

“Firms who employ a large share of migrant workers need to think now about adjusting to a lower migration environment, in terms of the workers they employ, what they produce and how they operate.

“The other big labour market shift that is still to come is a proper pay recovery. Yet we see further encouraging signs off the back of a tightening labour market. Nominal pay growth reached its highest level in a decade.

“However, a sustained pay recovery rests on stronger productivity and today’s sobering growth of just 0.1 per cent shows that this is still some way off.”

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Drop in EU migrant workers sounds alarm bell for UK construction

The drop in EU net migration has sounded alarm bells for the UK construction industry, the Federation of Master Builders (FMB) has said.

Commenting on the Migration Statistics Quarterly Report for August 2018, published by the Office for National Statistics, Sarah McMonagle, Director of External Affairs at the FMB, said “EU net migration is at its lowest level since 2012 and this is deeply worrying for those sectors that rely on workers from the EU. Despite the fact that we are still operating under the free movement of people, we’re already seeing far fewer EU workers coming to the UK and a greater number leaving our shores. This could be due to financial reasons since the depreciation of sterling following the EU referendum, which means that if these workers are sending money home, or saving up, their UK wages are now worth less. It could also, quite simply, be that some EU workers no longer feel welcome.”

“The drop in EU net migration is a particular problem for industries like construction. At present, 9 per cent of our construction workers are from the EU and therefore we are more reliant than most on EU workers. In London, this proportion rises to nearly one third. We can’t afford to lose any more EU workers as currently two-thirds of construction SMEs are struggling to hire bricklayers and 60 per cent are struggling to hire carpenters and joiners. If the Government wants its new homes and infrastructure projects built, it needs to do more to back up our industry’s message to all EU workers – they are welcome and they do have a bright future here in the UK.”

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One in three British construction firms reliant on migrant workers

A major CITB (Construction Industry Training Board) report into migration and the construction industry has revealed that a third of firms employ migrant workers, saying they have comparable skills to British workers and are more readily available. Some employers (22%) also said they have a better work ethic. But only 1% of firms said they specifically look to recruit migrants.

The large-scale, GB-wide research, by CITB, IFF Research and the Institute of Employment Research at Warwick University, is the first to bring together the views of construction firms, employment agencies and migrant workers. Researchers conducted over 600 interviews to provide a detailed and up-to-date picture of the role migrant workers play in the construction industry.

Over a third of employers who employ staff from outside the UK say they do so because there are not enough skilled applicants from the UK, rather than for cheaper labour. The issue is magnified in London where one in two employers say they are ‘very dependent’ on migrant workers, compared to around one in six in Yorkshire and the Humber.

The study dispelled some common misconceptions around migrant pay, skills levels and occupations. It showed that only 1% of employers say that migrants are cheaper and that the majority of non-UK construction workers are skilled, with over two-thirds holding a construction-related qualification. Two-thirds of employment agencies reported that migrant workers have similar skills to their UK counterparts.

Professor Anne Green who carried out the research at Warwick University’s Institute of Employment Research, says “The UK construction sector relies on migrant labour alongside UK workers to meet demand. This is especially the case in London. Migrant labour plays a key role in offering flexibility for the sector to respond in a timely fashion to project requirements. This means that the future immigration policy matters, as does training of UK workers.”

The research also showed that while the largest number of migrant workers (22%) are general labourers (22%), there is a wide spread across many skilled areas such as architects (15%), carpenters/joiners (13%), plasterers (13%), bricklayers (11%), and directors/managers/supervisors (9%). A similar spread of occupations was reported by non-UK workers themselves.

The workforce is still mainly British, however, with only 1 in 8 construction workers born outside the UK. One in 15 or 140,000 overall come from the European Union (EU). The majority come from Poland (39%) and Romania (26%) and is largely London-based.

The research found that three-quarters of migrant workers surveyed expect to be working in the UK in 12 months’ time, with only 1 in 20 expecting to move abroad, and over half expecting to work in the UK until retirement.

Recruitment agencies reported that EU nationals are more commonly placed than non-EU migrant workers and two in five agencies are expecting staff shortages due to Brexit. One quarter of employers reported at least one impact of Brexit on their company to date, with the most common being increased costs (12%), followed by project delays due to uncertainty and a lack of client investment.

London-based construction firms were more likely to report impacts because of Brexit including a lack of client investment (23%), project delays (19%) and staff shortages (13%).

Steve Radley, Director of Policy at CITB, says “Our detailed look at migration labour in construction illustrates how it gives employers the flexibility to respond rapidly to a range of skill needs. It shows that the construction workforce is still largely home-grown but migrant workers play a critical role, particularly in major projects and in London.

“While most firms are not reporting an impact from Brexit, those who employ migrants are concerned about the future availability of EU workers. But with over three quarters of construction workers expecting to stay in the next 12 months, we have breathing space to adapt to any changes in migration policy. While construction employers work with government on its future approach, we will support them to find new and better ways to attract, train and retain the workforce they need.

See the full report here.

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Industry express concern in response to ‘Preparing for Brexit’ report

Construction experts RICS have expressed concern for some time about the impact of Brexit on construction, particularly as positions harden.

Construction and Infrastructure market surveys continue to illustrate the ongoing skills shortage. However, the ‘Preparing for Brexit’  report released this week underlines the potential wider impact on productivity and investment in a post-EU Britain.

EU worker shortage

The ‘Preparing for Brexit’ report warns that losing access to EU workers in the construction sector could make it harder to achieve infrastructure ambitions, also reducing firms capacity to hit Government housing targets amid the continuing housing shortage regularly illustrated in the RICS UK housing market survey.

It is easy to see how London would be disproportionately affected in terms of construction and skills, and both for the capital and beyond it is an absolute necessity that construction workers and built environment professionals, such as quantity surveyors, are added to the UK occupation shortage list.

Wider implications

Looking at the wider implications in the analysis released this week, the impact on supply chains and the flow of construction materials and goods could confound this picture as around two-thirds of both export and imports of building materials are with the EU. Moreover, losing access to access to EU funding streams – including potentially the European Investment Bank (EIB) – and the dampening of demand from foreign investors due to uncertainty would be a further threat.

The UK Government must act promptly to keep EIB funding or introduce a new lender, or lending mechanism, to plug the gap created from the potential loss of EIB funds, particularly for shovel ready projects that are of great importance to the capital.

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RIBA calls for progressive UK immigration policy post-Brexit

The Royal Institute of British Architects (RIBA) has published a new policy paper recommending the creation of a post-Brexit immigration system that ensures the UK job market remains open to skilled professionals from around the world.

RIBA’s Global by Design report (February 2017) highlighted that of their members identified access of skilled talent from across the world as vital to the future success of UK architecture. 40% of non-UK EU respondents said that they had ‘considered leaving the UK with earnest intent’ following the EU referendum result.

The RIBA Building a post-Brexit immigration system that works for UK architecture paper includes eight key post-Brexit recommendations to Government:

  1. Come to an agreement with the EU over the rights of EU citizens currently living in the UK, and UK citizens living in Europe, that includes continued recognition of professional qualifications, at the earliest opportunity
  2. Review the minimum appropriate salary requirements for Tier 2 visas and reduce these requirements for recent graduates or those working for small businesses
  3. Reduce the cost and administration burden on businesses seeking to become a visa sponsor for employees
  4. Re-introduce post-study work visas to allow international architecture students to develop their professional experience between Part 1 and Part 2 study
  5. Secure a transitional relationship with the EU that extends the freedom to study and work in the UK beyond the UK’s exit from the EU in 2019
  6. Include work visa quotas in new trade agreements
  7. Extend mutual recognition of professional qualifications via new trade agreements with priority countries including the USA, Australia and Canada
  8. Implement a system of priority access for business travellers to support architectural practices to do business in overseas markets

RIBA President Ben Derbyshire said “Our members are clear that Britain’s exit from the EU must not imperil our pre-eminent position as a magnet for the very finest talent from around the world. UK architecture has benefitted enormously from the contribution of European and non-European colleagues, who have enriched architectural practice in this country.

“The RIBA’s proposed immigration system aims to ensure that the UK can continue to embrace and attract people to live and work in the country. We are pressing the Government particularly on the urgent need for certainty for our European colleagues currently living in country. Many of our valued colleagues are drifting away, and there will be an exodus, no doubt, if we impose unreasonable burdens on those who are fully aware of the positive contribution they have been making to our pre-eminent position.

“The RIBA will continue to make the case for a Brexit that works for our profession and our built environment, from securing access to the talent and investment we need to survive to opening up the new trade opportunities that will support architects to thrive.”

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Industry must take responsibility for making Brexit work

The recent triggering of Article 50 has set Britain on a course to exit the European Union. It is essential now that Government and industry work together to get the best deal possible and ensure our country’s future growth and prosperity — it is everyone’s responsibility to make Brexit work.

Britain must retain its front-line position on the international stage. Delivering the airport hubs, high-speed rail networks and energy systems needed to make our cities and industrial hubs global competitors will be critical to our future success. However, it is unrealistic to expect Government to deliver a successful Brexit without the full — if sometimes constructive — support of industry.
Unless the free movement of skilled labour is secured during negotiations, we believe that the UK’s predicted £500 billion infrastructure pipeline may be under threat. Our latest figures show that 8% of the UK’s construction workers are EU nationals, accounting for some 176,500 people. A loss of access to the European labour market has the potential to slowly bring some of the UK’s biggest infrastructure projects to a standstill.

Securing the domestic skills pipeline

Yet while it is the role of Government to secure the trade agreement, industry must also work to secure the domestic skills pipeline. As the industry’s professional body, we are working with Government and industry to develop that skills base, building vital initiatives, such as degree apprenticeships, in our sector to drive the talent pipeline forward. A recent RICS survey revealed worrying figures showing that almost a quarter of our construction professionals fail to recognise the benefits of apprenticeships in solving the skills crisis. It is vital that industry gets behind such schemes for Britain’s long-term good.

Last week Qatar pledged to invest £5 billion in British transport and construction projects. We believe that if the Government puts the right incentives in place, the UK’s energy, rail and road infrastructure will benefit from further billions of overseas investment.

Industry must play its part

But again, industry must also play its part. Currently infrastructure projects across the globe measure and forecast the costs of construction differently. So, the same high-speed rail project in say Spain, would have an entirely different projected cost if it were located in the UK even after accounting for currency differences or regional labour and material costs.

We are working with industry partners to introduce a new standardised global measurement known as International Construction Measurement Standard (ICMS) that will allow investors to compare like-with-like. We believe that this will help to put infrastructure firmly on the map as a global investment opportunity.

Together, Government and industry must work together to deliver a construction industry that is robust enough to withstand any future political and economic uncertainty.

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