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Brexit is potentially a game-changer for UK construction

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Brexit is potentially a game-changer for UK construction

Brexit is potentially a game-changer for UK construction
June 21
09:00 2017

“The UK construction industry is in a precarious situation on the labour supply side,” according to Michael Dall, Construction Market Analyst at Barbour ABI. “Brexit is potentially a game-changer with major implications for supply and demand.”

Michael Dall was speaking at the recent National Construction Summit, held at the RDS in Dublin. As Lead Economist at construction market analysts Barbour ABI, Michael Dall is responsible for providing detailed coverage of the UK economy with specific focus on the construction sector. His presentation at the National Construction Summit was entitled ‘The outlook for UK construction’.

“The residential sector has been driving UK construction since 2014, helped by Government-backed schemes like ‘Help to Buy’. I would expect Government-backed schemes to continue to prop up the residential sector in the UK,” he said. Residential is currently the largest sector of the UK construction industry, generating 31% of its value, followed by the infrastructure sector, which accounts for 28%.

The infrastructure sector has been buoyed in recent times by proposals for major projects such as HS2, the high speed rail link between London and Birmingham, and the Northern Powerhouse initiative, designed to stimulate economic growth beyond London. “Manchester, Birmingham and Liverpool are now more of a focus for the construction sector than 18 months ago,” he said.

“There has been a lot of talk about big infrastructure schemes but the make-up of the current minority Government might affect the time horizon of major projects.” He added: “I am not as optimistic about the future of infrastructure as I am for the residential sector.”

While Michael Dall remains cautiously optimistic about the outlook for overall construction growth in the UK, Brexit remains an uncertain threat. However, the prospect of a ‘soft’ rather than a ‘hard’ Brexit has improved following the UK General Election.

The UK construction sector has a large proportion of EU workers. In the overall economy, 82% of workers are born in the UK but this level falls to 55% within the construction industry. A ‘hard’ Brexit would have severe implications for the supply of labour to the UK construction industry. “UK construction will be impacted more by restrictions on workers than the economy as a whole,” Michael Dall commented.

Furthermore, the UK construction industry has a high proportion of older workers born in the UK, who are nearing retirement, indicating a potential loss of skills in the future. The prospect of a shortage of skilled labour within the UK construction industry is even more pronounced in the London area.

The Brexit factor is also impacting on the demand side of the UK economy. The drop in the value of Sterling in the wake of the Brexit vote has resulted in higher import prices with a consequent rise in inflation. “Rising inflation and the falling value of real wages will have implications for the future with lower economic growth as consumers are unwilling to spend,” he said.

“The UK construction industry does not have the same level of influence as say car manufacturing,” he pointed out. “So it is imperative that UK construction gets its voice heard.”

“There are political risks in the years ahead but the industry has proved resilient so far,” he concluded. “I am cautiously optimistic that some compromise will be reached on the Brexit deal.”


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