Last reviewed 31 March 2017
Paul Clarke considers the recent “Brexit White Paper” from BSRIA, highlighting the threats to the industry, the possible positives, and priorities for a post-Brexit UK.
Prime Minister Theresa May evoked Article 50 of the EU Treaty on 29 March 2017 and so began the two years of negotiation which will lead to the UK leaving the EU. Having originally restricted herself to suggesting that “Brexit means Brexit” and that she intended to press for a “red, white and blue Brexit”, the Prime Minister has more recently explained that it will involve leaving the EU’s single market and the Customs Union. But what does this mean for the UK, and more specifically the construction sector, and what are the challenges and possible pitfalls that lie ahead?
The worrying answer to those questions would be that no one really knows. However, the Building Services Research and Information Association (BSRIA) has consulted its members and the wider industry and brought the responses together in a Brexit White Paper aiming to provide some clarity in a confusing situation.
Available from the BSRIA website, the Paper explains the importance of Brexit to an industry which employs large numbers of EU workers and is also heavily dependent on international trade. “The sector spends some £4.6 billion per annum on goods relating to heating, lighting, ventilation, waste management and air conditioning,” it states. “Some 60% of the products used in the supply chain and in the delivery of the associated services are currently imported from other countries, with much coming from the EU.”
If it all goes wrong …
To start with the downside, BSRIA has identified four significant threats arising from Brexit, these being areas where lack of agreement during the negotiation period could leave the UK construction industry at a serious disadvantage. These are as follows.
Access to skilled labour
The Construction Industry Training Board (CITB) has estimated that in the next five years, the construction industry will require 157,000 new employees. The Mayor of London Sadiq Khan recently pointed out that over a quarter (27%) of the construction workforce in the capital originates from countries likely to be affected by Brexit-related immigration restrictions.
Access to the single market
If the UK fails to secure an adequate trading arrangement with the EU before it leaves the single market, the industry will face both tariff and non-tariff barriers when it comes to exporting and to securing the goods it needs from other countries.
European standards and regulations
As an EU member, the UK is able to influence the development of product standards across the whole range of industries. It then benefits from the fact that anything it produces that meets a European standard can be sold in any other Member State without further testing or certification. This would be put at risk if the Government fails to reach a suitable Brexit deal.
The UK is a major beneficiary of EU research funding. In general terms, net funding from the EU comes to well over £300 million per year of the total R&D expenditure in the UK. As the White Paper makes clear, this is important because: “The UK Built Environment industry both creates and is dependent on technology and innovation which requires a healthy and growing level of R&D funding.”
Looking on the bright side …
Those are some of the major problems that could be faced by the industry if the Government decides (or is forced) to pursue a “hard Brexit”. However, the White Paper also emphasises that there is cause for optimism. It identifies three major opportunities as follows.
Once the UK leaves the EU it will be in a position to pursue its own trade deals anywhere in the world and UK Trade Ministers are already making their case to the likes of India, China and Australia for post-Brexit agreements. Exports in the construction sector stand at roughly £150 million per year, according to the White Paper. “Brexit,” it argues, “provides an opportunity for this sector to expand within the UK and boost exports from what is currently a low base.”
Streamlining the regulatory environment
Freed from the need to comply with EU legislation, the UK could decide for itself what regulation and standards are needed by the industry. However, this has to be seen in the context of the threat detailed above: the industry cannot afford to move too far away from EU requirements if it is to trade successfully with the Union after Brexit.
Boosting the UK skills base
The positive correlation to the possible loss of skilled EU migrant workers is the opportunity that this would present to train British workers in the skills needed to take on these tasks within the industry. The Chancellor said, in his recent Budget speech, that “T-levels” will establish parity of esteem between academic and technical education with time spent by students doing technical training being increased by half. Construction is one of the 15 vocational routes described by the Chancellor, featuring both college-based and employer-based training. At the moment, however, this is still subject to further consultation.
Having carried out what is essentially a Strengths, Weaknesses, Opportunities, Threats (SWOT) analysis of Brexit, the White Paper sets out six main priority issues and suggests ways that the Government should respond if the construction industry is to be protected and supported over the next few years. BSRIA Chief Executive Julia Evans explains: “This Paper encapsulates the outcomes of a useful engagement exercise. There are several issues that are of severe concern to our industry. Without satisfactory resolution, these could have a large negative impact on the industry and the 562,000 people employed within it.”
She draws the Government’s attention to the need for the UK to focus on the following.
Maintain access to the EU
The Prime Minister has already committed the country to leaving the single market but the BSRIA insists that this must not mean that the UK loses all access. Not only would this be required for the general wellbeing of the UK economy but it would be vital to a sector that imports over £2.8 billion of goods and which could be severely damaged by the rising costs caused by the imposition of tariffs. A trade deal with the EU before the end of the Brexit negotiations is seen as an imperative.
Secure new trade deals
At the same time, and acknowledging that no deal the UK secures is likely to match the unfettered access to the single market it presently enjoys, the Government must press ahead with trade agreements with countries outside the EU, with a particular focus on the services the construction industry provides.
Ensure access to skilled labour
EU nationals currently working in the industry should be given immediate formal assurances that they and their families will be free to continue to live and work in the UK, the White Paper argues. In addition, a system should be put in place that enables UK companies in this sector to continue to access the highly-skilled labour they need in the future from Europe and the wider world.
Support research funding
The simple point made here is that any shortfall in research funds resulting from the UK no longer qualifying for EU money should be made up from UK sources.
Maintain stability on regulation
There should, the BSRIA insists, be as much stability and comparability on regulation and standards as possible after Brexit. Its member organisations are strongly of the view that the Government should provide clarity by stating a minimum period of time during which there will be no variation of existing standards and regulations.
Invest in skills
The Government must make good on its promises to improve vocational education and must continue to support apprenticeships.
“There is grave concern about the future, following departure from the EU,” Ms Evans concluded. “They [her members] are clearly looking for Government to support them in the uncertain days ahead by providing clarity and direction.”