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Construction: The Impact of Brexit

04 Aug 2016

The world of construction is changing. Brexit has been a huge wake-up call for everyone across the sector and it is clear to see that the UK is still riding through a significant transition period. According to the industry body for chartered surveyors, several companies have seen their workload slow due to the uncertainty regarding the future of the industry, a further indication that the shockwaves from Britain’s vote to leave the European Union have yet to subside. While onlookers continue to voice considerable concern over the uncertain long-term impact of the referendum, others are announcing the vote as a decision that has stabilised the UK and provides grounds for optimism.


Following the vote, French building supplies group, Saint-Gobain, publicised the result as one that could provide a much needed boost for the construction industry.


“It's possible we'll see some contraction in the economy...but it's also possible that the British government will launch a stimulus project in the autumn and that there will be no slowdown in activity", Chief Executive Officer Pierre-Andre de Chalendar told reporters. 


For companies such as Taylor Wimpey, it’s business as normal post-Brexit. The housing firm recently confirmed that its growth has not been dramatically affected since the leave vote was announced in June. 


“One month on from the EU Referendum, current trading remains in line with normal seasonal patterns, Chief Executive Peter Redfern said. 


“Customer interest continues to be high, with a good level of visitors both to our developments and to our website. By shaking any impending fears over the impact of Brexit, and the uncertainty surrounding the decision, we were able to grow profits by 12.1% in the six months before July 3rd.”



Construction company Morgan Sindall has since announced a strong visibility outlook this year. In the months leading up to the vote, the firm increased its efforts to secure a "high quality secured order book" worth more than £3 billion. 


“If we see any slowdown we'll react accordingly. But we're not seeing anything at the moment in the markets we operate in", said Morgan Sindall CEO John Morgan. 


For the recruitment sector, the Brexit vote was mostly positive. 


“The decision has been encouraging for us working in the built environment sector, as it shows that there are plenty of companies within the industry that have retained a consistent pipeline of work,” says Chetan Devraj, Spencer Ogden Built Environment Principal Consultant. 


“It has also been well-documented that there is still a large housing deficit in the country and our house building contractors are showing no signs of slowing down.” 

The challenge of Brexit can be successfully conquered with the support of politicians and a willingness from the government to remain positive. The UK’s newly appointment Prime Minister, Theresa May has recognised the need to support the industry and is starting to execute the correct measures to enforce beneficial change. 


“If we are to take advantage of the opportunities presented by Brexit, we need to have our whole economy firing. That’s why this Committee’s work is of the highest priority, and we will be getting down to work immediately, said the Prime Minister. 


“The pressure to act is mounting and the government is aware of the need to create a future-proof solution. We need a proper industrial strategy that focuses on improving productivity, rewarding hard-working people with higher wages and creating more opportunities for young people so that, whatever their background, they go as far as their talents will take them." May said. 


While many bureaucrats acknowledged a slowdown was imminent, the Chancellor, Philip Hammond, is now claiming the sector will receive support sooner than anticipated. 


“I am confident we have the tools to manage the challenges ahead and along with the Bank of England, this government will take whatever action is necessary to support our economy and maintain business and consumer confidence” he said.


Investing in the Future

Both businesses and consumers will agree that the biggest impact of Brexit has been the temporary depreciation of the British pound. Collectively, investor confidence has taken a hit, however, the current state of a weaker pound to foreign investors does offer an additional incentive which can assist companies suffering from the initial outcomes suffered from the stock market. Recovery will be quicker than expected if the reaction is fast, as the sector relies heavily on a steady flow of investment to ensure a healthy pipeline of projects.


Banks across the UK are lending their support to ease the significant pressure placed on construction companies. 


“Encouragingly, the swift actions of the Bank of England in creating additional capacity for the banking sector to provide funding to meet demand should help alleviate some of this pressure”, said RICS chief economist Simon Rubinsohn.  


Before the vote took place, positive action was taken to further lift the sector. The Technology Strategy Board (TSB) announced that it would look to support the UK construction industry with an investment of £60 million. TSB plans to assist with the designing and developing of more energy efficient buildings and the projects are expected to bring in an additional £60 million of industry investment and £30 million of extra funding from across the government and other agencies. 

Become the Evolution 

Brexit has not been a complete catastrophe. It’s too early to assess the long-term impact of the referendum, however with close monitoring and a flexible approach, companies have the ability to remain profitable. While the UK will continue to remain subject to all EU laws and treaties during the negotiation period, before they discuss all bilateral trade agreements with the EU to access the common market, it is important that we stay agile and educated and avoid making impulse decisions. If the UK cannot come to an agreement that will reduce the effects of Brexit, it will have to ramp up investment in training for UK nationals to reduce the skills deficit. Officials doubt that employment law will change, although this is not entirely predictable.


A post-EU Britain has every potential to regain its independence, and also acquire greater international stability, but this outcome will heavily rely on the country’s ability to create positive transformational players. A solid solution framework will be needed to ensure the protection of jobs and future projects, and this responsibility lies with the UK government. To support this and ensure long-term sustainable growth and positive change, stakeholders will need to understand that this shift is not entirely dependent on the action of governments but the reaction of companies across the global construction landscape. It starts with confidence. Confidence will need to be boosted across the sector over the next 12 months and it will require strategic collaboration and productive action from all parties involved. 

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