Will Brexit impact property and construction market

 

Brexit – a blend of the words ‘British’ and ‘exit’ which refers to the possible of Great Britain leaving the European Union. This word is on everyone’s lips; “Land Securities chief executive says Brexit would create shock in property market” and “JCB boss says UK should not fear EU exit”.

 

So enough of the general points, in a strange scenario the construction industry has been reluctant to get involved in the debate over whether or not the UK should leave the EU. Now in truth a large section of the industry only really supply their services locally but more broadly a number are seeking to expand overseas. Although a number operate solely locally, the clients they service could either themselves be from Europe or even funded from within Europe.

 

The terms of engagement by David Cameron with Europe are in the final stages and it is widely expected that in this month we know what has been agreed to allow us to make our final decisions. As someone who has only ever known life with the EU it is hard for me to know whether in or out will be better. Though like 85% of construction and real estate companies, as surveyed by Smith and Williamson, I think continued membership in the EU makes better sense.

We are living in a world where there is the need for greater collaboration. The ever changing economic environment of which large parts are out of our control means why would we add something to the agenda that is in our control. The current consensus is that we would be damaged if we leave the EU but to be honest how do we know? Will Europe simply cut us off if we exited? No. But there would be a need to renegotiate everything. So simply put anything that damaged the UK economy is not going to be positive for the construction industry.

As a mathematician I love a statistic so here we go. The CBI has estimated that leaving the EU would cost us about 4-5% of GDP, while the Centre for Economic Performance at the London School of Economics has estimated 9.5% and of course the reverse argument by Open Europe at 1.6% growth as a result. No a concern to me would be the inward investment from the EU – would it slow down, stop or continue like a juggernaut? Well I think irrespective of all this people invest in London, in the UK, not because we are in Europe. Now only if the departure from Europe causes such economic upset that inward investment slows down would it seem to me to be a worry – but that is the million dollar question, will it? However there may be less of a desire for businesses to want headquarters in London and may opt for Paris, Amsterdam etc. to be within Europe.

I think whether you are for or against a Brexit you need to think more broadly than your own personal view – what is best for this country. We all want growth and prospects for ourselves but also our next generation.

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

 

Enjoy the weekend

Lee