How the British construction sector will pay for Brexit
How the British construction sector will pay for Brexit
Constricted movement of labour into the UK may augur problems for its construction sector
Britain’s construction sector could pay dearly for the nation’s decision to leave the European Union.
In a new report from public accounting firm network BDO, construction projects in the UK could face a variety of problems when the country implements the results of the June 23 referendum.
“The impact of Brexit on the UK construction sector is likely to be mixed. Inevitably it will be affected by economic instability and any reduction in foreign investment into the UK,” the report stated. “The biggest impact on the construction sector may well be the post-Brexit availability of skilled immigrant labour from the EU.”
With Brexit blocking the free movement of workers from continental Europe, construction costs may rise. The weakened sterling is also likely to make the importation of goods and services for construction projects costlier.
Nearly 5 percent of construction workers in Britain hail from the EU or are non-British nationals.
Otherwise, there may be comparatively little in the way of construction activity lined up for Britain. Compounding Britain’s perceived construction woes is the fact that levels of inward investment in British commercial real estate dropped by almost half in the first six months of the year, reported BDO.
More: Post-Brexit: UK real estate firms are targeting Chinese investors
In the City of London alone, more than GBP650 million (USD860 million) in deals have fallen through as a result of the referendum, driven mainly by concerns over finance and technology companies relocating to continental hubs like Paris, Dublin, Amsterdam and Frankfurt.
“Institutional funds in particular appear to be withdrawing, at least temporarily from UK property activity. A number of open-ended property funds have suspended trading recently as investors have been drawing down the cash funds available until the underlying property can be sold,” BDO reported.
Although BDO acknowledges that Asian and Middle Eastern investors may be drawn to the UK residential market because of the devalued sterling, reduced immigration and employment from Brexit will eventually drag housing demand and house prices down.
“London stands to be most affected by this decline which on the other hand might be welcomed by many if it were to make homes more affordable in that region,” BDO reported.
BDO believes that, following Brexit, the UK will still follow the Construction Products Regulation as well as uphold EU standards in occupational safety and structural design.
“It seems unlikely that the UK would either return to the British Standards system or implement standards which diverge from the rest of Europe,” BDO stated.
Read next: Asian investors will hurt the most from Brexit, experts warn
Source: Property Report