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On the face of things, the UK construction industry is thriving, with the growing demand for new housing, and the government intent on improving the infrastructure of the country with mega-projects. The government has set a lofty goal of building an average of 300,000 new homes every year within the next five years. It’s also embarked on the High Speed 2 rail link from London to the north, and given the go-ahead to the Hinkley Point C nuclear plant. Both of these are massive and complicated projects. The forecast is for the spending of £600 billion on infrastructure and related projects over the next ten years. However, those plans may be shot full of holes if there are not enough skilled construction workers to complete the job. Despite the investment, The construction industry continues to face a severe skills shortage, and with Brexit that could become even more critical. Two-thirds of the country’s contractors are worried about the detrimental impact Brexit will have on the labour market, and a quarter is getting ready for a downturn once Britain leaves the European Union.
Drawn by relatively higher wages in the UK, construction workers from the EU and elsewhere have helped plug the gap in the labour market. The Office for National Statistics reports that 7% of workers in UK construction nationally come from the EU. In London, and other significant centres that figure jumps to 28%. There are more foreign workers in construction than in any other UK industry. If EU nationals choose to return home after Brexit, the loss of a quarter of its construction workforce will have a detrimental effect on commercial building and London’s critical housing shortage.
The construction industry continues to face a severe skills shortage, and with Brexit that could become even more critical. Two-thirds of the country’s contractors are worried about the detrimental impact Brexit will have on the labour marketTweet This
Impact of Brexit
There are still so many unanswered questions about Brexit, such as whether the withdrawal will affect health and safety regulations as we know them, but there is one thing construction professionals are agreed on, and that’s that Britain leaving the EU will have a negative impact on the industry and particularly the labour market. One of the main reasons people voted to leave the EU was to curb immigration to the UK. Being a member of the EU allowed citizens from the other 27 countries to freely live and work in the EU without any restrictions. Once Britain turns its back EU membership, the UK government is at least likely to severely restrict or even stop EU nationals from moving to the UK. Part of the British government’s plan is to screen all migrants wanting to work in the UK. One of the criteria is described as ‘geography-neutral’; in other words, there would be no preferential treatment for workers coming from EU countries. A two-tier visa system would be in operation where workers would need to qualify by having a minimum level of education, and a salary of at least £30,000 a year. As you can see, this is weighted against unskilled workers, the sort of labour the construction industry is desperately short of at the moment. Leading industry figures have criticised the government for adopting this standpoint, and have warned of dire consequences to construction within the UK.
The UK construction sector has become reliant on migrant labour to meet the growing demands put on it by government goals to invest in infrastructure and housing. That same government is likely to hamper these goals with the implementation of new immigration rules post-Brexit. Construction has always needed a pool of unskilled or semi-skilled workers to do the manual work typical in building projects even with newer projects involving sips construction. Should the government’s plans for entry into the UK go ahead then these labourers won’t be able to get in as they do not meet the new criteria. The only option left to the construction industry will be to recruit workers domestically. The only reason there has been such an influx of foreign workers into the UK construction industry is that British workers have been reluctant to take up these jobs. Industry experts fear that the situation won’t change and that post-Brexit there will still be a labour shortage, only this time it will be even worse. Therefore there will not be enough manual labourers to meet the demand of the construction industry, and with any shortage of supply, the price of their time will go up. The simple supply and demand curve is likely to see hourly rates and hours rise dramatically. This imbalance will see the overall costs of projects balloon.
As we can see, any reduction in the number of employees in the construction industry from Britain leaving the European Union will have considerable consequences. The industry’s ability to meet government targets will be severely hampered. A failure to meet the targets set by the government in particular areas such as housing will have an impact on the population as a whole. It’s expected that the housing crisis in places such as London could only worsen. With people unable to find a home, and get on the property ladder, it is likely to have a wider impact on the economy as a whole. There is also thinking that construction contracts due to lack of capacity and other factors may see investors withdraw money from the UK property market. If that does happen, we could see house prices fall, and properties that are sitting empty could become available. Unfortunately, we have no crystal ball, and the future is far from clear. The most likely outcome would be a mixture of all the scenarios, but none are likely to be wholly positive.
Those EU nationals working and living in the UK at the time of Brexit are likely to be allowed to remain and be granted permission to stay once the country leaves the European Union. Construction companies are being recommended to hire the migrant staff they will need for projects before the exit date.
Deal or No Deal?
With negotiations still in the balance at the time of writing it is unclear what will be the state of employment for EU nationals and those from the European Economic Area (EEA), which includes Norway, Switzerland, Iceland and Liechtenstein.
What appears to be the case is that should the UK strike a deal with the EU on its departure, EU nationals living and working in the UK will have a transition period to apply for settled or pre-settled status. The time limit was set about two years after the actual departure of the UK from the EU. As the rules appear now, workers could apply for settled status if they have spent five years of continuous residence in the UK. If they do not have five continuous years of residency, they can apply for pre-settled status. Those with pre-settled status would have the right to stay in the UK until they reach five years and then have the opportunity to apply for settled status and be granted permanent residence.
It should be noted that settled status is not the same as permanent residence. Also, failure to apply for settled, or pre-settled status before the deadline set by the government will mean the person will no longer have the legal right to live in the UK. The deadline for applications is expected to be two years after the UK leaves. Family members and close relatives will also be eligible for settled status depending upon their age and dependency. There will be separate rules regarding workers from the EEA countries, decided bilaterally with the four countries.
If there is no deal with the European Union on Britain’s exit, then the situation becomes more complicated. If the EU decides it requires immigration controls for British nationals, then the UK government is likely to respond in a similar fashion. In that case, the UK may employ the current points system for migrants from the rest of the world. This means any skilled worker from the EU would need a visa to work in the UK, and be subject to the terms set out in the two-tier system.