The Impact of Brexit on the Construction Industry
Even though Brexit came into effect two years ago, we are only just starting to see the full impact of how this now affects UK businesses. With new rules to follow and additional administrative tasks that must be completed, the transition of working in a post-Brexit world has been challenging for many businesses.
Recruitment issues
In the construction industry, the changes to the UK immigration system have affected the supply of labour. Foreign labour has been used in the UK construction sector for many years, for both skilled and unskilled roles. The free movement ended on 31 December 2020 and since then, many construction companies have struggled to recruit suitable workers.
A large proportion of construction companies had previously relied on recruiting foreign construction workers and the changes to requirements, such as registering to be a sponsor and ensuring individuals meet the job, salary, and language criteria, has left the construction industry short of labour.
This could result in failing to meet government targets such as to build 300,000 new homes each year to help resolve the housing problem in the UK.
According to ONS, prior to Brexit 10% of all construction workers in the UK were EU nationals and in London, 33% were from the EU. So, this is a significant impact to completing projects in the construction sector.
Movement of goods
Another significant change due to Brexit involves the movement of goods, with traders being required to meet the Rules of Origin, which includes a significant amount of extra paperwork and expense.
The UK-EU Trade and Co-operation Agreement means that most traders moving goods from the UK to EU do not need to pay tariffs, but the new processes increase the cost of importing and exporting goods.
This means that the cost of construction materials has seen significant increases and there have also been delays in importing goods due to all of the new red tape. Some companies have reported that they have been required to pay around 20% more for the materials they are buying. Given that over 60% of the UK’s building materials are imported from the EU, these Brexit changes have had a huge impact on the construction industry.
As well as facing inflated costs, many construction companies have experienced problems in obtaining crucial materials, holding projects up, and therefore driving costs up this way too. This situation has not been helped by the supply issues related to the COVID-19 pandemic and the Suez Canal blockage in 2021, which caused significant delays to the supply of many materials too.
Now that businesses have had more time to adapt to the challenges posed by Brexit, it is easier to comply with the new rules, but the issues related to recruitment and higher material prices remain.
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