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Brexit - How this will impact on UK Construction

Brexit - How this will impact on UK Construction

  • United Kingdom
  • Brexit
  • Competition, EU and Trade - Brexit
  • Construction and engineering

24-06-2016

Brexit and the legal implications for businessesThe impact on UK construction will vary depending on the Brexit model the UK and the EU adopt. Predicting all of the possible impacts is difficult, if not impossible, but we highlight some of the more likely ones below.

Regulation

The UK's vote to leave the EU will not necessarily result in less regulation. By way of example:

  • The Construction Design and Management Regulations 2015 which essentially enact EU Directive 1992/57/EEC and require certain minimum health and safety requirements in design and construction, are unlikely to be swept away. Health and safety is, rightly, here to stay.
  • The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 enacting EU Directive 2002/91/EC requiring Energy Performance Certificates for buildings is unlikely to be repealed: energy efficiency is again, an issue which is here to stay.

Procurement

It would be surprising if, post-Brexit, the UK were not to impose some regulation on public procurement. Equally, UK contractors tendering for work in the EU will be required to comply with EU procurement rules.

Access to foreign labour

The skill shortage within the UK construction industry and its heavy reliance on skilled labour from within the EU is a well-known concern. A restriction on the free movement of EU nationals will put upward pressure on wages.

In the short to medium term, projects may be delayed due to the lack of necessary skilled labour and project costs will increase to reflect higher labour costs. In the longer term, the viability of undertaking large scale infrastructure projects may be put in jeopardy.

Imports and exports

The supply of goods and services for the construction industry is a key driver of growth in the UK and the UK is at least partially reliant on imports from the EU. The extent to which these may be affected will depend upon the post-Brexit model adopted.

Exchange rates

The vote to leave has led to currency fluctuations. In an industry where margins can be tight, where there is heavy reliance on the import and export of goods and services, currency fluctuations can have a significant fiscal impact. Whereas the inclusion of exchange rate clauses in contracts is always a possibility (allowing for example, a renegotiation on price if an exchange rate fluctuates more than a specific number of percentage points), it does mean businesses may need to affect an additional level of strategizing, particularly in relation to exchange rate fluctuations, prior to planning or otherwise undertaking future construction projects.

Please also see the Contract and trading relationships section for more on contractual issues.

Access to finance

The availability of finance is often an important pre-requisite for construction projects. Currently as a member of the EU, UK small and medium sized enterprises (“SME”) have access to special programmes for SME financing. These will no longer be available following Brexit, however they may be replaced by equivalent UK schemes. The referendum outcome may affect the UK’s creditworthiness, and if it does, the availability of financing could be reduced, more restrictive financing conditions could be imposed on borrowers and higher interest rates could result.

For more detail, please see our Brexit resources on construction.

 

Visit our Brexit Legal Advice Hub for in-house lawyers

For more information contact

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