The trade and security deal the UK Government struck with the EU is a bare-bones deal for tariff-free trade in goods. For many other business sectors that are not covered by the trade deal it means a no-deal outcome creating significant frictions and less EU market access from 1 January. Below we explore what it means for the Property & Construction industry.
Snapshot:
Brexit deal outlook: Reduced access to EU workers and increased costs and administration for sourcing building materials will lead to increased constructions costs overall and subsequently higher building prices.
Overview:
The property and construction industry employs a significant number of workers from the EU, and uses materials imported from the EU. These two factors will bring major challenges in 2021, even with the Brexit deal agreed now. Employers of skilled engineers and technicians from the EU are required from 2021 to go through additional bureaucracy to recruit and employ new employees in these fields. The visa fee of £9,500 per employee represents just a small proportion of the additional costs that will be incurred, especially when a value is attributed to the additional management time that will have to be committed to the process. The impact on the modernisation of the UK construction industry, and its efforts to contribute to carbon zero by 2050 is difficult to quantify, but a reduction in the skilled employees who could help in this process is not desirable.
Our building sites employ a significant number of EU nationals, with estimates suggesting that 8% of the workforce nationally, and as much as 28% in London, are from the EU. Many of these workers are self-employed. The ability of these workers to continue working in the EU after Brexit depends on them taking appropriate action. It will be illegal to employ anyone without a settled status from 1 July 2021, which could cause major skill shortages across building sites in the UK.
The other major factor is the ability to source materials, both raw and manufactured, for sites. The UK is dependent on the EU for a large proportion of bricks, timber, doors and windows as well as specialist products used on construction sites. The chaos at ports due to the turmoil in the freight and shipping industries caused by the pandemic was reported extensively in December 2020, but major delays in the import of goods (and the increase in prices that will result from the imposition of tariffs) are going to add to construction costs, at a time where many construction companies are still trying to recover from the turmoil of 2020. The only certainty is that the cost of building a new home, or a new railway line, is going to go up.
Would you like to know more?
If you would like to learn more about how Brexit may impact you, please visit our Practical Guidance: Brexit hub here.
And if you have any questions or would like to discuss your specific circumstances, please get in touch with your usual Blick Rothenberg contact or one of the partners on this page.