The big three Brexit issues still facing UK construction

27-07-2020

With Covid-19 appearing to reach manageable levels and the crisis moderates, Britian’s departure from the European Union – Brexit – once again returns to the political agenda.

With divorce negotiations between the EU and the UK government seemingly having reach an impasse, a ‘no deal’ exit on 1st January 2021 is looking the most likely scenario.

This leaves the UK construction industry in limbo over three key issues – product standardisation, import tariffs and (still) access to migrant labour.

The issues have been spelled out clearly this week by Thames Tideway chief executive Andy Mitchell. In his capacity as co-chair (industry-side) of the Construction Leadership Council (CLC), he has written to Alok Sharma, secretary of state for business, energy and industrial strategy, setting out his concerns. Alok Sharma is also the boss of the CLC’s other co-chair (government-side), junior business minister Nadhim Zahawi, so he should not really need telling.

Andy Mitchell’s letter mixes a degree of Uriah Heep sycophancy with some home truths that government Brexiteers have persistently failed to address.

Mr Mitchell applauds the government’s “steely determination” and says he is “grateful for the strong and effective working relationship” that has been created because the government has “listened intently”.

But beyond this gushing, he makes it clear that UK construction is unable to prepare adequately for 2021 and beyond because no one in government has revealed its full plans, assuming it has any.

Specifically, will the UK have its own standards for building products, materials and machinery, or will it just continue to observe EU regulations even though it will have no say in them? It’s a big issue that has been inadequately addressed.

Mr Mitchell writes: “As an industry, we hold in high regard the standards and regulations in place that protect consumers and ensure high quality, fit for purpose products and materials. We have been reassured by the government’s publication of the Construction Products (Amendment etc.) (EU Exit) Regulations 2019, which ensure regulatory alignment on exit day. However, the government’s advice on the Construction Products Regulation in the event of a no deal was withdrawn earlier this year. We would like to ask that this guidance is updated and reinstated as soon as possible, to allow businesses to prepare for a possible no deal scenario at the end of the year.”

He continues: “We would also like to ask that the government provides a clear longer-term direction on what it intends to do in relation to the current standardisation of regulation of products and materials with the European Union. We are keen to avoid a situation that leads to inconsistent standards across businesses or a lowering of standards generally, as any divergence will inevitably lead to greater complexity, confusion and ultimately cost for UK businesses. We would like to reiterate the importance of a significant period of consultation before embarking on any divergence in building products and materials regulations and ask for confirmation of when that consultation will take place at the earliest possible stage.

“While the government has announced the creation of UKCA to replace the CE mark, it would be preferable for our industry if we could reach an agreement that achieved mutual recognition of such standards. Without mutual recognition of, for example, testing standards, UK businesses will have to repeatedly test products for different markets, which will add substantial costs and cause delays, damaging UK competitiveness.”

Secondly, there is the whole question of tariffs on imported construction products, materials and machinery, which remains up in the air. How can a contractor sensibly price for a job beyond January 2021 without knowing what the costs may be?

Andy Mitchell tells the secretary of state: “The UK imports billions of pounds more construction materials and products from the EU than it exports. The nature of construction projects mean that the delivery of materials and products predominantly work on a ‘just in time’ delivery basis. Keeping construction sites operational and productive will depend on the ability of businesses to efficiently move these goods across the border and through our ports; especially as it is not always possible to source all materials, products and components from inside the UK (around 22% are sourced from abroad). Currently, businesses are unable to adequately predict the prices and costs of materials and goods that originate from the EU after 1 January 2021. Without being able to anticipate their ability to reliably source and cost materials and products when needed will have profound impacts on business planning, site operations, project completion, contractual uncertainty, cash flow and ultimately, business survival. We must therefore significantly ramp up the business information campaigns informing businesses of the likely border arrangements and actions that they should take to prepare for no deal.”

More familiar is the topic of immigration, much discussed both within and beyond the construction industry but still inadequately resolved. This is a Home Office matter, but the business secretary doubtless has influence.

Mr Mitchell tells Alok Sharma: “The UK construction sector employs a significant number of skilled and unskilled foreign workers, thought to account for over 14% of the construction workforce. While the economic effects of the Covid-19 crisis will lead to a number of job losses, which will likely increase the available domestic supply of labour in the short term, in the longer term, we will continue to need access to foreign labour. We welcome the government’s announcement that a number of additional construction trades have now been included in the tier 2 skilled work category, such as bricklayers, carpenters and electricians and that the new entrant route is to include those working towards professional qualifications. However, a number of roles remain outside of the proposed new system such as labourers, dry liners, asbestos removers and some plant operators, despite a clear need for them. The government’s proposal for low-skilled migrant labour is the temporary worker route. However, if this is to work for our sector, the duration of the work permit will need to be extended to two years. We ask that you consider amending the proposed Bill to reflect these concerns; otherwise the industry will be faced with a shortage of labour supply.”

Mr Mitchell concludes his letter with: “If the government could provide the information and reassurances outlined above, it would aid our businesses in adequately preparing for whatever eventuality occurs after 31st December 2020.”

Source: The Construction Index