The negotiations for Brexit are causing concern for the construction industry. Revisions to the regulatory framework, gaps in the skill market, and issues with the supply chain are sure to cause issues with the sector. As we have already seen, one of the largest construction and utilities companies in the UK, Carillion has collapsed under the stress. Though activity rose in April 2018 according to PMI figures, issues abound. Sky News suggests that more than half of construction industry bosses are already feeling the impact of Brexit.
The Growing Skills Shortage
Construction and property consultancy Gleeds suggest that 66% of industry professionals feel the negative impact of Brexit uncertainty. For many, the biggest concern is the shortage of skilled labour, exacerbated by issues around the immigration status of non-UK citizens. Deloitte's research indicates that 36% of foreign staff in the UK are considering leaving by 2022. This number jumps to 47% for skilled employees. When 1 in 3 construction firms employ migrant workers, it’s easy to understand the concerns.
Inability to Attract New Talent
Brexit doesn't just mean a loss in the workforce we have today. The fall in the value of sterling has reduced potential earnings for international candidates. With construction projects happening throughout many parts of Europe, the UK isn't the first choice for construction professionals. Unfortunately, this means more issues for contractors and managers who already have trouble recruiting expertise. In 2017's fourth quarter, 67% said they struggled to find bricklayers, and 50% were unable to hire joiners and carpenters.
Bigger Housing Crisis
Issues with hiring may have a knock-on effect on the ability of housebuilders to meet with government housing targets. The government sets targets for the construction industry to build 300,000 new homes each year to assist with the housing problem. However, with a lack of construction workers, labour may be spread too thin between infrastructure, housing, and private projects. So far, concerns with labour have led to slower progress in private projects, but there's some concern that residential campaigns will suffer in the years ahead.
Supply Chain Issues and Material Inflation
The UK construction sector relies heavily on importation. The EU delivers up to 62% of our building materials and components - equalling approximately £5.7 billion in supplies. At the same time, supply chain costs are rising. During 2017, the cost of building components saw its highest rise since 2011. Unless a deal emerges that allows the construction sector to minimise costs, the price of materials might continue to rise. If the UK cannot replicate beneficial agreements, inflation will continue, with some firms already reporting up to 20% higher fees for materials. The rise in costs doesn't stop with imports either. Changes in tariffs may also play a significant role in the growth of the construction sector, with significantly higher fees on goods coming into the UK.
Infrastructure and Funding
Finally, funding and infrastructure may see a hit in the UK. The European Investment Bank previously funneled a lot of money into projects throughout the country, delivering around 7.8 billion euros in 2015. The EIB offers support for multiple platforms, including agriculture, transport, and urban development. Without access to EIB funding, the UK may struggle to fund ongoing projects like smart motorways. Combined with the higher prices of materials, the sector will need to find a significant amount of additional investment. With so much uncertainty to overcome, construction firms have a tough road ahead. The first step for many will be addressing the issues that may affect their business. Auditing the supply chain and recruitment process will help to mitigate risk exposure. However, most companies will be forced to wait and see what Brexit brings.
About Change Recruitment
Change is a specialist recruitment consultancy based in Scotland. We have a strong reputation for service delivery. With a global reach, we work across the UK, EMEA, the Americas and Asia-Pac, locating exceptional talent for some of the world’s leading organisations. With over 45 years in the recruitment industry, our areas of expertise include; Accountancy and Finance; Investment Management and Asset Servicing; Risk and Compliance; IT, Digital and Business Change; Marketing; Business Services and Construction and Building Services. To get in contact with our friendly team. Email us here or call Glasgow ++44(041) 226 3101 or Edinburgh +44(0131)225 7744.