Key points tradespeople in construction need to know about Brexit
Assessing the potential impact of Brexit for self-employed tradesmen and tradeswomen.
The construction industry is in the front line of sectors directly affected by the mounting uncertainty over Brexit. And as an industry with many self-employed tradespeople, it’s worthwhile for anyone who works in it to focus on a few realities of leaving the EU.
As the arguments for and against a deal or no-deal swirl around us, some things are known and generally accepted as fact, while other issues remain unclear. Regardless, each might help you make up your mind about what form of future relationship with the EU will be in the best interests of your business.
A sector that relies heavily on the self-employed
The construction industry is unusual because of the high proportion of self-employment in the sector – 37% in Q3 2018, compared to the average for the whole economy of 13%. For an idea of just how important self-employed tradesmen and tradeswomen are to the economy, statistics show us that in 2017 these individuals were working on construction orders worth £163 billion.
The fact is, the UK construction industry depends heavily on foreign and migrant workers for many roles. The Office of National Statistics (ONS) figures show that one-third of workers on construction sites in London were from overseas, with 28% overall coming from the EU.
With the ending of free movement of labour that will result from Brexit, there is a growing fear that a skills shortage will be experienced in UK construction, leading to higher project costs as labour demand outstrips supply. As a self-employed tradesperson, you could find your earnings rise because your skills are in shorter supply. That said, higher building costs are unlikely to be in the long term interests of the industry.
In October 2018, Mark Reynolds, Chief Executive of international consulting and construction company, Mace, attacked the Prime Minister over the Government’s plans to prioritise immigration after Brexit around high-skilled workers with no priority for those in the EU. Mr Reynolds accused the Government of ignoring industry worries over the availability of less skilled labour once Brexit has happened.
Unsurprisingly, London is the hotspot for EU construction workers. Other areas of the UK are expected to be less affected, but the capital is an important engine for growth in the entire market.
Import and export issues
The EU isn’t just about the free movement of people. It allows for the free movement of goods between EU member states, eliminating duties and other restrictions. And the importance of the EU supply of materials for UK construction has been growing for many years.
What will happen after Brexit is speculation, but importers and exporters may face new duties or limits on quantities, which could potentially lead to a shortage of construction materials or an increase in costs. On the other hand, the Government might enforce a policy of using only UK suppliers of materials, thereby supporting internal growth and jobs.
It isn’t clear whether Brexit will lead to the Government imposing tariffs on cheap steel imports from China that have led to the decline of the UK steel industry. Historically as a nation, we haven’t been keen on propping up industries in this way, and there is always the potential for retaliation from the countries we constrain.
The possibility of a no-deal Brexit is causing delays to new building projects across the UK. This is according to a survey just published by IHS Markit and the Chartered Institute of Procurement and Supply, that shows a slowdown to the weakest rate in 10 months. The data, which is gathered from purchasing managers in the construction industry, is closely monitored by the Bank of England and the Treasury. It revealed that Brexit anxieties were among key reasons for delays to decision-making on new projects at the start of 2019.
Demand for tradespeople
There has been a slowdown in hiring too. Firms are taking on construction workers at the slowest pace since immediately after the EU vote in 2016. Building companies said the time it took for sales to be agreed had increased, which perhaps reflects a ‘wait-and-see’ approach to spending by clients.
Meanwhile, commercial building is said to be the weakest sector of the construction industry currently. It’s thought concerns about the health of the British economy after Brexit has influenced the demand for new shops, offices and other commercial property.
Perhaps surprisingly, homebuilding came out as the strongest sector, probably due to the state support provided by the help to buy scheme. However, continued uncertainty could well impact this.
For self-employed tradesmen based in London, projects in the capital are thought to be particularly exposed to the risk of a no-deal Brexit. Other cities like Birmingham, Manchester and Edinburgh are more buoyant, but there is doubt about whether there will be enough regional activity to pick up the slack from the capital.
There are still a number of Brexit questions that need to be answered in the next few months, making it difficult to predict exactly how self-employed tradespeople will be impacted. However, with the number of people working for themselves in the UK on the rise, there is reason to believe the flexible workforce has the resilience to weather any storm.
Rhino Trade Insurance provides a range of tradesman insurances to protect self-employed and small business owners against uncertainty and risk – from tradesman public liability insurance to tax enquiry insurance and tool insurance.