How The UK EU Referendum Will Affect The Construction Sector

There has been plenty of debate about how the UK European Union referendum result is likely to affect property demand, but little focus on how the construction industry might fare.

But now, the boss of one UK leading developer has spoken out, saying the sector has enough issues trying to build the homes the country requires for its growing population and battling bureaucracy and does not need any more issues.

Bob Weston, Chairman and Chief Executive of Weston Homes, tells OPP.Today, “The single biggest challenge to us as a business is the supply of labour. I don’t see how the government can control immigration without harming Great Britain Plc. Eighty per cent of the people working on our sites inside the M25 are not of British descent and 60% outside the M25.”

There are many practical issues presented by hiring non UK labour, he says. “You need a sponsor licence to employ someone from outside the EEA and Switzerland. To employ someone on a tier 2 visa, they need to be a certain skilled occupation – electrical engineers, architects, town planners, quantity surveyors and construction managers being the main ones for us – and you have to advertise the job for 28 days to show that you can’t find someone suitable who is eligible to work in the UK. This takes time and money. The only exceptions are for skills on the shortage occupation list – but most of the roles we’re looking to fill aren’t included. The ‘so called’ lower skilled trades such as carpenters, plasters and glaziers can’t be sponsored at all.

“You can also employ a part-time student on a tier 4 visa but once their studies are complete you have to go down the tier 2 route to keep them. Tier 2 also has a minimum salary requirement; you have to pay over £35,000 per annum to employ them. This is an issue, especially when hiring graduates. The government has also been talking about introducing an up-front charge on each migrant, which is another potential cost to think about.”

The shortage of labour has contributed massively to an increase in construction costs, Mr Weston. argues. “Whilst the lack of construction capacity as a result – has held back the supply of new homes. Both of these outcomes have put upward pressure on property prices.”

However, the speculation surrounding the vote has not yet affected Weston Homes. “I can’t speak for others but at the moment our business is generally unaffected by the vote uncertainty. The industry has probably been more affected by the forthcoming changes to SDLT for additional properties.”

It is also difficult to predict how the industry would be affected if the vote was to exit the European Union. “As for the impact on the property market, you can overthink both sides of the argument until you come up with the answer you want hear. The truth is that no one knows.

“In terms of the housebuilding/ construction sector, if leaving the EU means we don’t have free movement of people in Europe, who is going to build the extra 100,000 new homes a year that the government says we need? It could have long lasting ramifications for the industry.

“I’ve read that a Brexit could still mean membership of the EEA or a ‘Switzerland type’ deal to allow free movement to continue, but I can’t understand why the electorate would allow that to happen since most of the out campaigners are motivated by the immigration issue.”

Another factor in the vote on Thursday 23 June is that there is so little information coming out from either side about what the outcome of a Brexit would mean.

“It is as [Chancellor George] Osborne says, ‘a massive leap into the dark’. The Scottish referendum had been planned for several years yet they still couldn’t decide whether they would have the pound or euro. Voters need to know what a Brexit would look like otherwise how can they decide. At the moment, it’s another ‘scaremongering campaign’ led by a government that has only planned for one result.

“On balance, I can’t see any issues that negatively impact my business so I’m of the view that we should stay in and avoid all of this uncertainty.”

Meanwhile, a survey from financial services specialist Smith & Williamson suggests the UK property and construction sector wants to remain part of the EU and backs concerns over employment issues expressed by Bob Weston.

The results show that only 15% of respondents indicating that a British exit from the EU would have a positive impact on the industry.

Mark Webb, Chairman of the Property and Construction Group at Smith & Williamson, says, “The industry has traditionally been viewed as quite inward focused, which may make this finding surprising for some.

“However, when considering that the key components of the sector are also cornerstones of the EU, access to labour and flexible working, it is less shocking. The survey highlights the concern within the industry that should a Brexit happen there is a very high likelihood of access to labour declining as margins are squeezed.”

The annual survey from Smith & Williamson, which had more than 200 respondents from across the property and construction industry, sought views on business confidence, the development of technology, government policy and access to finance amongst other matters.

The survey shows business confidence is growing; confidence in residential property over 2016 was 75%.

The top three issues facing participants were the global economy, taxation and access to finance. Global macroeconomic conditions weighed the most heavily on the minds of executives in the industry, as 72% identified it as one of their top three factors which would negatively impact their business over the next 12 months, reinforcing the potential ramifications a Brexit could have on the sector.

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