As the nation struggles to get its head around the implications of today’s EU Referendum result, leading industry figures are already weighing up the potential implications for UK construction. So just what does the future hold? We gauge a cross-section of the immediate reaction, from the positive to the downright pessimistic.
Patrick Flaherty, AECOM Chief Executive, UK & Ireland:
“As the country faces a period of change and uncertainty, business must play a stabilising role. A positive, long-term focus on the future is required despite a referendum result that we and many businesses did not want.
“No nation has ever left the EU, so the long-term impact cannot be accurately forecast at this time. These are unchartered waters made even more uncertain by the Prime Minister’s announced resignation and the leadership election that will follow. As a country we must navigate wisely. Business must support government as it leads the country through this period of change.
“Business inevitably now faces a period of disruption. At AECOM, we have demonstrated our ability to grow while dealing with change and we will work hard to minimise the impact on our UK operations. As a global company, we serve clients all over the world from our offices in the UK. Our strong team, diversification strategy and international outlook equip us with long-term resilience but we are well aware that many businesses are not so fortunate.
“It is critical that the domestic agenda is not sidelined as the UK faces a minimum of two years of negotiations to leave the EU. Focus must remain on energy security and energy independence, as well as progressing the UK’s ambitious infrastructure pipeline. Schemes such as HS2, Crossrail 2 and the Northern Powerhouse programme are vital to the country’s ability to compete on a global stage, which is more crucial than ever due to this referendum result.”
Richard Walsh, Managing Director of Pennine Stone:
“While we are still waiting for the dust to settle following the outcome of the referendum, the decision will not change the way Pennine Stone fundamentally works as a company.
“We will continue to deliver the level of service and supply of materials required by all of our clients, both now and in the months and years ahead, in order to perpetuate growth.
“Our expectation is that the UK’s economy will remain strong following the Brexit result.”
Mark Robinson, Chief Executive at Scape Group:
“Today’s result will create huge uncertainty for the public sector and its suppliers. With the financial markets and economy set to be turbulent, perhaps for some time, the public sector now faces the prospect of further government spending cuts on top of the very significant pressures they have already been put under. Long-term projects, like HS2, could now be at risk from the economic fallout of the result. The immediate priority for the government has to be to steady the ship, and provide as much clarity as possible on the renegotiation process and the security of government-funded projects in the year ahead.
“All of this however, will provide only limited reassurance to either the public sector or the construction industry, as the natural instinct of most decision-makers will be to put the brakes on their plans, as the uncertainty we’ve seen over the past two months deepens. Now is the time for strong leadership from public sector and industry leaders as well as the government.
“The government must clarify as a matter of urgency what will happen to the EU construction workers in the UK, as they are currently filling the gap left by our skills crisis. We need to recruit a million workers into the industry by 2020, and putting EU migrants off coming here will only exacerbate this problem. For the public sector and its supply chains to plan ahead as best they can, we need to know when and how migration and employment patterns will be affected.
“One area that is unlikely to change any time soon is procurement. Although the OJEU system is a creation of the EU, it’s rules and procedures are embedded in UK law and would require new legislation to be overturned. Changing UK legislation would be complex and time consuming due to the number of public sector and industry bodies with which consultation would be required. One of the few certainties we can draw from today is that the UK will always need a robust system of procurement that delivers value for both taxpayers and the public sector.”
Brian Berry, Chief Executive of FMB:
“The UK construction industry has been heavily reliant on migrant workers from Europe for decades now – at present, 12 per cent of the British construction workers are of non-UK origin. The majority of these workers are from EU countries such as Poland, Romania and Lithuania and they have helped the construction industry bounce back from the economic downturn when 400,000 skilled workers left our industry, most of which did not return. It is now the Government’s responsibility to ensure that the free-flowing tap of migrant workers from Europe is not turned off. If Ministers want to meet their house building and infrastructure objectives, they have to ensure that the new system of immigration is responsive to the needs of industry.
“At the same time, we need to ensure that we invest in our own home-grown talent through apprenticeship training. We need to train more construction apprentices so we are not overly reliant on migrant workers from Europe or further afield. That’s why it’s so important that the Government gets the funding framework right for apprenticeships – when you consider that this whole policy area is currently in flux, and then you add Brexit into the mix, it’s no exaggeration to say that a few wrong moves by the Government could result in the skills crisis becoming a skills catastrophe. The next few years will bring unprecedented challenges to the construction and house building sector, and it’s only through close collaboration between the Government and industry that we’ll be able to overcome them.”
Councillor Denise Hyland, leader of the Royal Borough of Greenwich:
“The council wholeheartedly supported the United Kingdom remaining in the EU, maintaining that membership had a hugely positive impact on the Royal Borough, its economy, and to the lives of residents.
“However, we respect the result of yesterday’s referendum and the views and decisions of voters, both in Royal Greenwich and across the nation.
“Clearly, we have entered into a period of change and uncertainty, but Royal Greenwich continues to be ‘open for business’. Our priority now is working in this new economic situation to build on our excellent record of growing the local economy, creating jobs and ensuring that the Royal Borough continues to be a place where strong local identity compliments diverse cultures and communities.
“It is vital that we work with local business leaders to hear from them about the impact that they will be facing and we will be calling a summit at the earliest opportunity to work with them to look at the future business landscape.
“We will work to ensure that cleaner environment policies are upheld in the wake of the UK’s exit from the EU, and our residents do not lose their rights to equal pay legislation, and non-discrimination policies on age, gender and race.
“We will also continue to enhance our borough’s reputation as a world-class destination for tourists from the EU and across the globe and, and continue to develop our economy to provide a secure platform for local businesses and an attractive place for larger investment and regeneration.”
Andy Bridge, Managing Director of A Place in the Sun (APITS Ltd):
“The announcement this morning that the public have voted to leave the EU comes as a shock to the UK and leads to a level of uncertainty for the overseas property market.
“An estimated 1.3m Brits currently live in the EU and the effect of this result will cause immediate concern as people wait to see what changes arise as a result of the vote. The UK will now officially inform Brussels they intend to leave the European Union followed by a two-year period where the terms of our new status will be set out. The status of Brits living within the EU will be high on the agenda, as will the status of EU nationals who currently live in Britain.
“Those who are looking to purchase a holiday home overseas, after an initial hiatus, are likely to see that owning a property in the EU will only be marginally more complex than it is currently. Residents of the US, Canada, Russia and many other nationalities own properties throughout Europe, so while it may become slightly more complex for Brits, clearly we are not going to be prevented from owning property in Europe.
“Recent research by A Place in the Sun found that nearly half (48 per cent) of those currently considering a purchase abroad would continue with their search if we were to leave the EU. It is expected that this number will be much higher after the first few months and Brits reignite their desire to own a property overseas.”
Richard Donnell, Insight Director at Hometrack:
“All indications are that the UK has taken the significant decision to leave the European Union and, as a result, the near term prospects for the UK housing market now look very uncertain. The immediate impact is likely to be a fall in housing turnover and a rapid deceleration in house price growth as buyers adopt a wait and see the short term impact on financial markets and the economy at large.
“The decision to leave the EU will be most keenly felt in the London housing market which is fully valued and already facing headwinds. History shows that external shocks can reduce sales volumes by as much as 20 per cent with sales volumes already down over the last year. House price growth is already weak and running in low single digits in central London areas and modest price falls now appear likely in higher value markets as prices adjust in the face of lower sales activity. Even a sharp fall in the Sterling is unlikely to attract overseas buyers in the near term. Across London, where house price growth is running at 13 per cent, we expect the rate of growth to slow rapidly on greater uncertainty and market activity in the capital is set to remain disrupted until consumers and the financial markets can see a clear strategy to manage the process to a position where the outlook for the economy, jobs and mortgage rates becomes clearer.”
David Savage, Partner within the construction team at law firm Charles Russell Speechlys:
“The impact the leave vote will have on the UK construction industry is at this stage largely unknown. The mechanism for leaving the European Union involves a minimum of two years’ negotiation between the UK and the EU on Britain’s exit terms. Therefore, during this period there will be significant uncertainty in a number of areas within the construction industry.
“The UK construction sector has always relied heavily on workers from outside the UK to fill both skilled and non-skilled roles. Under current EU treaties, workers in member states can travel freely to the UK in order to seek work, with no work permits or visas currently required. The Brexit vote could lead to a shortage of skilled workers that would create significant uncertainly in the market, as there is a chance it may lead to an acute skills crisis. Given the importance of access to labour and flexible working, the construction industry may stand to lose more from Brexit than any other industry.”
John Forrester, EMEA Chief Executive at Cushman & Wakefield:
“The property sector has probably followed the EU referendum more closely than any other industry and has witnessed the impact of the uncertainty and speculation in the run up to the vote.
“While the decision of the UK electorate is now confirmed, a period of further uncertainty is unavoidable as businesses, the financial markets and the political establishment in the UK, Europe and globally come to terms with what this means.
“Clearly the impact of this decision will be felt beyond the UK’s shores as the UK is the EU’s third largest market by population. We are therefore entering a period of unprecedented change as markets and sectors adapt. What is clear is that in any scenario there will always be opportunities and those will become clear in the weeks and months ahead.”
Philip Woolner, Commercial Director at Cheffins:
“It is difficult to forecast the effects that Brexit will have on the commercial property market. Ultimately, the UK, and London and Cambridge in particular, is such an attractive market for overseas investment that any knock-on effect is likely to be short-lived. There is a possibility of a period of stalling across investment sectors, with occupiers choosing to stay put, however, the fundamental prospects of business will still be strong. Before the Referendum there was a divergence of opinion within the industry with questions around the occupiers, take-up levels and restrictions on workers’ migration, however as Cambridge continues to be a powerhouse for innovation and excellence, it is doubtful that we will see a vast change to our market. It is impossible to predict the results of the Brexit until some months have passed, so in the meantime, it has to be back to business as usual and wait and see what happens.”
Randeesh Sandhu, CEO of Urban Exposure:
“While markets may react negatively to today’s ‘Leave’ vote, the fundamentals underpinning the UK housing market still remain attractive. In the short-term, while there may be an impact on decision-making and activity levels, we also expect to see an increase in interest from foreign investors if sterling devalues to the extent many have predicted.
“Indeed, the UK still has unique appeal as a market for international purchasers – from the mixture of characteristics including our quality of life, culture and diversity, ownership security and legal system, time zone advantages for international business, language, schooling and education. A return to ‘business as usual’ may take longer than if we had remained as the specifics of a ‘Brexit’ will take time to determine and therefore there will continue to be a period of uncertainty. It is important that the government pays close attention to the key risks that could affect the sector during these talks – for example, the impact on the supply of labour, which could further exacerbate the acute shortages of skilled workers for UK construction firms if Brexit restricts migration from the EU into the UK.
“Change will come out of the UK leaving the EU, but the imbalance between demand and supply in the UK housing market will endure. So while buyers may pause as the implications of Brexit are figured out, over the medium to long-term we do not expect housing markets to change drastically as a result of the vote.”
Monika Slowikowska, founder of Golden Houses Developments:
“Everyone is in shock. House building companies’ shares are already down by as much as 40 per cent and bank shares are plunging. Property analysts are predicting an immediate slowdown in transactions. The construction industry and the banks are always the first to show signs of a crash and these signs are already visible.
“The cost of labour in the construction sector has increased by an average of eight per cent in the last six months and it’s set to keep rising. By leaving the EU, and based on our projects, we predict that this could increase by an extra 15 to 20 per cent. We saw luxury property falling in prices by 15 per cent and £3m-5m property by a five per cent before Brexit and investment in property is slowing. Foreigners are losing interest in the UK and are leaving large deposits behind when not completing transactions.
“The property crash is a natural cycle, especially when prices rise strongly with no end to the increases in sight. The market needed to balance out and the current situation means prices will come down even more dramatically than predicted. As an industry, we can’t close our doors to foreign investment.”
John Newcomb, Managing Director of the BMF:
“The BMF fully respects the democratic decision that has been made by the British people and in which our members, their employees and customers have participated. Our priority now is to work together in the BMF and with other trade bodies to make sure the construction industry is properly consulted and engaged in discussions with the government about the implications of the vote to leave the EU. There are many important issues to raise on behalf of BMF members about future changes that impact on jobs and the future of projects and funding that are linked to the government and in some cases to the EU.
“Next week the BMF will enter a period of detailed discussions with other leading Trade Associations such as the CBI, CPA and FMB about the impact of today’s decision on our sector and a more detailed statement will be issued from the BMF Board to all Members following these discussions. In the meantime if you have any specific queries or comments about how today’s decision will affect your business then please contact either myself or any member of the BMF Board.“
Jonathan Hopper, Managing Director of the buying agents Garrington Property Finders:
“The irony is agonising – that after voting so resoundingly to remain, London should see its property market decapitated by a victory for the Leave camp.
“Prime central London property has already suffered more than any other market from the uncertainty unleashed by the referendum. With a quarter of the capital’s corporate rental market driven by the financial services sector, the convulsions being experienced in the City today will filter down to the property market within days.
“Looking further ahead, the only sure thing is that we can’t be sure of much. The actual process of Brexit is unlikely to be quick or easy, but it’s the prolonged period of uncertainty that will accompany it that is likely to prove most toxic.
“The blunt truth is that many investors – for whom property is a discretionary purchase – will sit on their hands until the dust settles. And no-one really knows how long that will take.
“Optimists will point to the collapsing Pound as a potential plus. London property will certainly become cheaper for overseas investors, but buying property is not like buying a holiday. No-one makes a long-term financial decision purely because of a favourable exchange rate.
“In any case, the successive hikes in stamp duty on high value investment properties will cancel out much of the benefit that Sterling weakness might bring to foreign buyers.
“As a result the Prime central London market risks a triple whammy of falling demand, supply and prices.
“Looking outside London the impact will be less dramatic, but the uncertainty will do little to unblock the supply shortage. Would-be sellers will be more likely to stay put, and this morning’s collapse in the share price of Britain’s largest housebuilders hints at a freeze in new building.
“In normal times constrained supply might drive up prices. But these are far from normal times, and a softening in prices is all but inevitable. The property market is likely to make a cry for help – and the new prime minister will face growing calls to reverse the stamp duty raises.
“Without renewed stimulus, Britain’s property market faces a ‘hard reset’ and a Darwinian future of victims, survivors and predators.”