A one-sided argument: What leaving the EU would mean for UK construction

The debate on the UK’s EU membership rages, as the Greek crisis adds fuel to the Eurosceptics’ fire and rumours circulate over an early in/out referendum.

Sceptics maintain that our exit would create jobs for British workers and save the country billions in EU membership fees.

Meanwhile, pro-Europe campaigners claim that economic security would be severely weakened by an increase in trade deficit and global investors leaving the UK in favour of cheaper EU rates.

For construction, the argument is more one-sided.

A pro-Europe industry

The impact on an industry heavily dependent on a European workforce, often using foreign investment to construct buildings for a global client base, has considerable implications.

A loss of skilled labour is one of the more obvious problems that could face an independent UK.

Our industry is increasingly reliant on migrant labour, aided by the EU’s ‘Right to Free Movement’ between member states.

Without this, emigration to the UK would be harder and eurozone nationals may choose, or be required, to locate elsewhere.

The Union is also likely to want to keep its supply chain within EU borders, offering financial savings for members and keeping issues like compliance simple.

On this basis, international construction companies would find it exceedingly difficult; given that construction already has a significant skills and labour shortage, how would we deal with an even more restricted situation?

Lack of investment

Leaving the EU could result in the loss of some of the UK’s primary investment sources and construction clients. Between 2012 and 2014, foreign investment funded a third of the UK’s 66 infrastructure projects.

The Regeneration and Investment Organisation stated in January 2015 that discussions were under way with overseas investors on more than £5bn worth of UK projects.

Larger economies such as the US, China, India and Japan see the UK as a gateway to the EU, and, according to a survey by TheCityUK, 40 per cent of international firms working in London reported that the UK’s EU membership was one of the main reasons for setting up in the capital.

Funding for the Hinkley Point Power Station has come from France’s EDF Energy, and Chinese investors ABP are active in projects such as Royal Docks and Old Oak Common.

Leaving the EU would make UK exports subject to EU tariffs, and as the UK’s main trading partner, European production standards would need to be met.

With no way of influencing future trading regulations, the UK could lose its appeal for global businesses. EU policy changes impact public procurement, energy efficiency, the late payments directive, health & safety at work – all of which would become a fait accompli for the UK.

Affecting business

Sixty-two per cent of UK construction materials are imported from the EU. Items could become far more expensive, affecting cost and lead-in times of construction projects. Overseas clients could move to lower-cost EU countries.

If the banks followed suit, this would significantly damage UK stability, particularly in London.

Prime commercial space would be freed-up, changing the supply/demand profile for the worse.

While greater supply often leads to a reduction in prices, this would be brought about for the wrong reasons and lead to a stagnation in commercial construction.

The uncertainty could rattle a fragile industry.

If the next 18 months is a period of hesitancy, foreign companies could divert or postpone investment into the UK. If the referendum is brought forward, let’s all be clear and realistic about the impact leaving the EU could have.

Stuart Senior is a director at Gleeds

Opinion piece first published in Construction News on the 31st of July 2015

Date:

30.07.15

Author
Stuart Senior

Stuart Senior
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