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The monthly magazine providing news analysis and professional research for the discerning private investor/landlord

Construction Industry Post-Brexit: What Will Happen?

Mark Hempshell reports

As most investors will know, the housing market is literally 'underpinned' by the supply capacity of the construction industry which could be affected more than most by Brexit. In this report we will look at what this could mean for the construction industry, and subsequently the UK's house building capacity.

First let's look at what, broadly, Brexit could affect - quite apart from the health of the wider economy - and what it could mean. Brexit could affect the investment climate in housebuilding, the supply of labour and materials, the costs of both and so affect future housebuilding supply and the property market.

Some announcements at the Conservative Party Conference offer a few clues as to what might happen in some of these areas. Theresa May has announced the exit process will commence in spring 2017 with the UK to leave the EU in spring 2019. The truth is, though, much depends on what the UK's future relationship with the EU, yet to be negotiated, will be. Should Britain (as seems increasingly unlikely) stay in the Single European Market, or have a Norwegian or Swiss style arrangement with the EU, most EU regulations together with freedom of movement of labour and tariff free trade would probably remain. Outside of any of these arrangements none of them would probably remain. Additionally, as a general principle, the Government has said that all current EU laws will be drafted into UK law from Brexit, with unwanted laws to be 'weeded out' later.

The Chancellor Philip Hammond has suggested there will be continued investment to support the economy during the Brexit period, and possibly a loosening of austerity measures. Together with the Communities Secretary he has announced the Government will provide £3bn for a housebuilding fund and make £2bn worth of funding available for building on public land. The aim is to build 25,000 additional homes by 2020 all adding up to 1m new homes (including underlying normal annual building levels) by 2020, with a long term 200,000 additional homes provided by the funding.

Planning to boost supply is one thing of course but the practicalities behind finding the labour, materials (to say nothing of the land) are another. So let's look at the impact of Brexit on these issues. In a pre-referendum survey by 'Building Magazine', two thirds of respondents in the construction industry favoured Britain remaining in the EU. Sixty percent believed it would lead to a fall in foreign investment, while 55% and 53% respectively said it would increase labour and materials costs.

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