Leaving the EU could spell disaster for the UK’s construction industry
With David Cameron’s EU negotiations coming to a head, a few business leaders have put their heads above the parapet and spoken about the business imperatives to stay in the EU, but the construction industry is still remarkably quiet on the subject. Many construction leaders are wary of being drawn into the political arena.
My take is that this is not politics – the two main UK political parties have opposing views within their own ranks – this is economics, or more specifically Global economics. And yet the British electorate is being currently being fed a diet of constraint from business and fervour Brexit supporters, with very few verifiable facts in any part of the debate. The choice is being presented as one of “conscience” or “opinion”, rather than one where the consequences of either staying in or leaving are carefully considered. UK construction is a global enterprise, and construction is a process driven industry – we make plans, consider risk, determine costs, build to programmes - so we should very well placed to make a rational decision and give rationally based views.
So, from a construction perspective what are the facts?
UK construction has benefitted from EU directives forcing up both Health and Safety and environmental standards. The Thames super sewer scheme is a £4bn example, with Thames Water citing compliance with the Urban Waste Water Treatment Directive as one reason behind the scheme.
The construction sector is one of the biggest net beneficiaries of EU funding in the UK. EU money has directly funded most of the major regeneration schemes around the UK – many of which simply would not have happened without this level of external intervention. At face value this should not have an impact – presumably the contributions saved by exiting the EU would be used to fund these projects without EU intervention. But there would be a loss of the effect of scale and a real risk of regional parochialism. The UK already has a poor track-record on the co-ordination of and commitment to infrastructure projects, and without this EU imperative there is a strong chance that this would become even less focussed. The EU funding mechanisms consider real need and measurable benefit, rather than the voting preferences of the constituents – would this be the case if these funds were administered by our UK political masters?
Leaving the EU will create bureaucracy and cost for UK companies as they struggle with immigration law and visas
Primarily though, the EU provides significant funding, labour and materials to the UK and the UK provides significant expertise to the EU and beyond. Leaving the EU will make it more difficult for UK firms to compete both at home and abroad and in my view leaving the EU would have a negative impact on the UK construction sector. The BBC’s business editor Kamal Ahmed wrote: I was struck during a visit to Japan in 2012 how company leaders there were baffled at the thought that Britain would leave the largest trading union in the world. I share their bafflement.
On any typical UK construction project there will be a measurable proportion of EU labour and materials – this has been the case for over two hundred years – the UK railway network would not have been built without Irish labour. But, contrary to popular opinion this is not because it is cheaper than UK labour. It is generally either that they have a specific expertise – Italian marble craftsmen, or there is simply not enough supply in the UK – Polish plumbers. In either case leaving the EU will not suddenly create a home-grown supply. Nor will it force UK companies to train more UK nationals. Migrant labour (both into and out of the UK) is a buffer for the peaks and troughs of a cyclical industry.
Leaving the EU will, however, create bureaucracy and cost for UK companies as they struggle with immigration law and visas. A potential unintended consequence of this is that it would open up the UK’s doors to a much greater influx on non-European labour. This labour-gap would have to filled somewhere and if it is equally difficult to bring in staff from any country in the world then price will become an even more dominant factor. This could have the diametrically opposite effect to the one desired by Brexit campaigners and actually put further price pressure on UK companies as the doors swing open to the burgeoning Asian construction giants!
British property and construction companies are a global force - particularly in the consultancy and specialist manufacturing sectors. There is still a premium attached to British design, British business ethics and British technology, but access to this international marketplace has been eased and facilitated by EU trade agreements – negotiated on behalf of all EU countries.
If the UK suddenly falls outside the protection of these agreements it will make it very difficult for us to compete with our European counterparts. If employing a German or French engineer or architect is easy, but employing a British one is bureaucratic and difficult – which one will get appointed?
Just to back up my “opinion” - when polled privately more than four out of five professionals in the property and construction sector want the UK to remain part of the EU, according to the 2015 Smith & Williamson property survey, with as little as 15% of respondents believing a British exit from the EU would have a positive impact on the industry.
Ann Bentley is Rider Levett Bucknall’s global chairman