April 19, 2019

What will a no-deal Brexit mean for the construction industry?

As the clock continues to run down on Britain’s exit from the European Union, Jack Gevertz, a content writer for the Immigration Advice Service; an organisation of UK immigration solicitors that provides legal support for those looking to migrate to the UK or hire overseas workers, looks at what a no-deal Brexit will mean for the construction industry.


Theresa May’s initial Brexit deal has already been slapped down by the House of Commons. She lost by more than 230 votes – the biggest defeat for a Government in modern history. As she tries to salvage it, there’s a high risk that the UK will eventually crash out without a deal.

But what could such a move have on an industry like construction?

Labour

One of the biggest challenges facing construction in a no-deal event is the movement and access to labour. Construction relies heavily on migrant labour and the ability of labour to move freely. According to the CBI, workers from outside the UK account for more than one in seven of the workforce. More than half of these – at 51% – are from EU member states. These workers fill a range of roles including general labourers, carpenters, plant and machine operatives, and bricklayers.

Current immigration rules mean unless you are an EEA citizen, you have to obtain a Tier 2 Visa in order to come to Britain. This means the applicant must satisfy a number of criteria under a points-based system, including earning more than £30,000. They will also need to apply for a Sponsor Licence.

In addition, if the job is not on the Shortage Occupation List, then it must be advertised to national and EEA citizens under what is known as the Residency Labour Market Test.

If the job is on the Shortage Occupation List, there is no Residency Labour Market Test, so the company does not have to advertise the job here first. In order to be on the list, it must be an occupation which is in demand. These are generally highly-skilled jobs, of which there are very few in construction.

The entire Tier 2 process can be long, arduous and expensive. Research by the Progressive Policy Think Tank found that if this process was applied to EU citizens, just seven per cent of the current EU born construction workforce would be here.

But luckily for them a new system has just been announced. European Temporary Leave to Remain is for anyone from an EU member state who wishes to stay in the UK longer than three months. It will allow them to remain here for three years.

If they wish to stay longer, they will need to apply under the new immigration system, outlined in the Immigration White Paper. It’s unlikely that construction workers will be offered an extension because the Government is committed to reducing immigration to “sustainable levels” and has targeted low-skilled economic migration as a means of doing this.

To add to this, the policy does not apply to EU nationals already resident in the UK. For them to remain here, they must apply under the EU Settlement Scheme. Again, this can be a long and arduous process. There may be workers who don’t know about it or simply forget. Their legal rights could enter a ‘cliff edge’ on 29 March – where they suddenly lose them.

Trade

Adding to the woes of the construction industry in the event of a no-deal Brexit is the impact on trade.  According to a 2010 study by the Department for Business, Innovation and Skills, sixty-four per cent of building materials were imported from the EU and sixty-three per cent exported to the EU. These products will face both tariff and non-tariff barriers.

Monetary tariffs could be put on them under World Trade Organisation rules. This could make the products more expensive for firms.

Even worse are the non-tariff barriers. These are the extra bureaucratic measures that mean the products can’t simply just be let through. The CBI estimates that these cost companies an extra 6.5%. Some companies work on ‘just-in-time’ business models and so rely on the sending of materials last minute.

The government has already raised the prospect of tariff and non-tariff barriers causing delays, and plans to use the M20 in Kent as a lorry park.

Testing

There is further bad news when we look at testing. Some construction products may need to be re-tested by EU safety regulators in the event of a no-deal Brexit. That could mean further disruption to the processing chain.

Regulation

Initially, regulation of construction products will be kept in line with that of Europe’s. Existing, EU standards will become harmonised with the UK’s immediately following our exit. However, the government plans to designate new standards, leaving uncertainty over what they might be and how they will affect construction. Will they still be accepted in the EU?

Funding

Questions also remain over access to crucial funding. Both the European Investment Bank and the European Investment Fund have invested almost €8 billion in major UK infrastructure, including on the expansion of the port of Liverpool and High-speed 2. With the current austerity agenda, it’s unlikely funding from these sources will be matched by the UK government. That could have severe ramifications.

A no-deal Brexit would be disastrous for British construction. It would heap costs on to firms and create unnecessary uncertainty. As a nation – with a skills shortage and a chronic lack of housing – we can’t afford to let that happen.