How uneasy will the Brexit rollercoaster make the cyclical construction industry?
The construction industry is notoriously cyclical. At many different points in my career, I’ve seen projects of various sizes in most sectors stall, and have also seen skilled tradesmen hang up their tools in favour of steadier jobs, more often in completely different industries. However, in terms of future twists and turns, it is difficult to assess how Brexit will impact the industry I have worked in for 32 years.
Since 23 June last year we’ve been hearing the clunks of the chain lift, felt the altitude notching up, and the air getting thinner. Now with Article 50 being triggered 10 days ago, it feels like we’re on the crest and looking into the biggest dip the largest rollercoaster has to offer. So, who’s buying a ticket?
I’m normally quite comfortable with numbers – much more so than rollercoasters, anyway – but the figures spouted by Lord Stunell (the man tasked with assessing the impact of Brexit on the construction industry) during a marathon Lords debate on the Brexit bill, made me feel quite queasy.
We all know we’re in the middle of another housing crisis. It’s a crisis this government thinks the ongoing issues with demand, which have now been in play for over 10 years, are better solved by addressing the supply and volume of new houses, rather than solely offering incentives to help savers and first-time buyers. The only way we can fix this supply issue is to support the growth of a fully functional, unhindered construction industry. Lord Stunell outlined that to meet the government’s own infrastructure and housing commitments, construction needed to expand by 35%.
Left feeling short
So, it was really worrying to hear his assertion that the proposed restrictions on immigration following Brexit would cause the very same construction industry to shrink by 9%.
That sort of swing could be very detrimental to a supply line that is already hundreds of thousands of homes short.
Furthermore, UK projects currently enjoy a tariff-free flow of goods, with circa a third of all materials, including 90% of timber, imported from Europe.
Analysis of the past 10 years’ completions adequately supports the theory that productivity has already been woefully inadequate, so without investment, materials and staff coming into the UK, developers would likely pull away from new projects and the much mooted 250,000-homes-a-year figure will be incredibly difficult to meet.
Construction absolutely needs a much higher priority in the Brexit debate. It cannot languish as a low topic of debate in the government’s current negotiation strategy. Because this would make the rollercoaster worse; it’s one thing to aggravate a cyclical industry, but takes things to a new plateau when considering the risk to the supply of homes for the next generation.
Whatever your political persuasion when it comes to Brexit, a construction industry dip was never anyone’s intention at the voting booth. Everyone from first-time buyers to large corporations are reliant on it and a downturn now could again take years to recover from. Since I was 16 I’ve seen how long it takes for staffing levels to recover after the building trade enters a contraction, one study pinpointed it at 5 years – and that’s without migration restrictions muddying the waters.
Flight to quality
As I said, we’re all on the edge looking down at the distant twists and turns and I don’t know how it will play out. But I am glad that I have this seat on the rollercoaster. I think I’m sitting as pretty as anyone in our industry can be, currently working in a sector and region that will feel the Brexit jolts far less than others.
To borrow an investment term, I genuinely believe there will be a flight to quality across the building industry. Not only will investors and funds move their capital away from riskier developments to the safest possible investment vehicles, but skilled contractors, PMs, consultants will congregate at those firms able to provide the work. In my mind both investment and construction across Manchester, the north-west and the wider private rented sector are as Brexit-proof as any site, plans and pipeline in the UK could be by comparison.