Voting in and out for construction

Whether you are voting to stay or voting to leave it doesn’t matter – the key is that you vote and have your say but more broadly an entire industry is on tender hooks as they brace themselves through the current uncertainty and potential impact of which ever decision the UK takes. Vote Leave thinks it is entirely possible – and easy – to negotiate a ‘friendlier’ relationship with the EU; one based on free trade, with all the benefits of EU membership and none of the costs. If this pans out, gloomy predictions from prominent British officials and leading global institutions may, indeed, prove to be over-egged. But how likely is this?

The house building industry is clear – there will be pitfalls for both buyers and developers if a ‘no’ vote occurs. But is this simply not just because the whole EU referendum is drawing attention away from the severe lack of houses available. You can view Brexit has having little impact on general confidence levels as the majority of UK sales are to UK residents and the undersupply means activity levels are unlikely to be changed as demand and pricing levels remain robust.

There is the argument though that Brexit will impact overall investment (at least in the short term) – but more broadly you can argue labour supply. It is already short and the EU supplies a large amount of that supply. If we remove this supply do we bring labour shortage right back into the issues arena.

To me the supply of labour is linked to an under investment in apprentices but was mitigated by migration. Implications of Brexit could simply lead to tighter regulation and therefore damage construction activity.

But to be fair you have to ask “how likely is the Vote Leave” scenarios? A new relationship, once defined, will need to be ratified by all 27 remaining nations – an already challenging feat potentially made even more difficult by the wave of discontent currently sweeping across the Union. Negotiating a new relationship with the UK is unlikely to be at the top of many nations’ agenda.

So pressure on input costs, conversely, may increase. Near-term, sterling, already down by between 5% and 10% against both the euro and the dollar, would probably depreciate further following an exit vote, raising the cost of imported building materials – 60% of which come from the EU. The near-term outlook for wages is less transparent. Migrant labour forms an essential component of the UK construction workforce, accounting for up to 50% of total employment on some Central London sites. If free movement rights are quickly revoked, labour rates may come under increased short term pressure. Longer-term, changes to immigration policy could also have serious implications for our industry. The Vote Leave campaigners are seeking to address this one with a scoring system for people seeking to come to the UK. This one will inevitably need to be resolved early if the UK economy is to remain in some form of equilibrium, but I sense this would be possible, as the desire to do so would be strong.

I don’t hide that I am part of the Stronger In Campaign but I do respect people who are part of Vote Leave – my simple wish is that people do vote and that they take into account not only short term views but longer term views as well – you will only be around for a proportion of the time of whatever decision is taken so simply think about your children.

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.

Lee