Construction Industry Can Meet Brexit Challenge
As the General Election gets closer, the realities of Brexit negotiations become more tangible. The EU’s chief negotiator, Michel Barnier, has pencilled in 19 June for the first formal day of talks with the UK Government’s team about withdrawal from the European Union.
"These could be the most important negotiations in the country’s history."
Whatever the deal, Brexit will affect the already troubled UK construction industry.
Firstly, the Government recognises construction, especially house building, has three major issues. It set out in a housing white paper in February that building contractors face a growing skills gap, old methods of building and poor access to finance for all but the largest developers.
Secondly, the 0.7% fall in construction output in March is part of a series of weaker-than-expected economic data and illustrates concern that the UK economy as a whole could be in a renewed slowdown caused by the uncertainty of Britain’s future outside the EU.
Finally, the fall in the pound has increased the cost of imports. Around 59% of total construction materials used in British housebuilding is imported from the EU and the cost of building is already going up before we have even exited.
"Materials make buildings, whether you’re building a new home or a school. So the supply chain must have access to the best components at reasonable prices."
Tariffs or trade restrictions post-Brexit may level the playing field on price for our home manufacturers, but could also limit their access to export markets. Without export markets, manufacturers won’t get economies of scale to be competitive to supply the UK market.
So, manufacturers of building materials are going to need to some security and continued access to the single market from Brexit negotiations. They will continue to make their products to EU standards in order to sell to the single market, but they will have to find a way to differentiate either on price, innovation or service of the Sterling remains low against other currencies.
Longer term, builders will need to address higher sustainability standards like BREEAM, and mitigate ongoing skills shortages, especially with the end of free movement of people. That could mean a greater reliance on the part of the supply chain that produces materials.
Properties built or part-built offsite will be a solution to automate construction, which in turn means new skills are needed. This process for building is still developing, but with some smarts and capital, it could become UK manufacturers new strategic competitive advantage. And for the contractors, could decrease our reliance on imports and create higher value new jobs for the building industry.