Brexit and the construction industry; British architects foresee strong decreases in the volumes
Regardless of our perspective on the matter, we can all agree that the topic of Brexit is shrouded in volatility. As the situation changes day by day, any predictions about how the Brexit will come in effect are mere speculations. Regardless of the outcome of Brexit, the current uncertainty is already taking its toll on the construction sector in the UK, as became apparent in the results of the latest version of the European Architectural Barometer (Q2 2019), for which we interviewed architects from eight European countries including the UK about turnover and order book developments, as well as about the theme ‘labour shortage’.
For the first time in years, construction volumes in the UK are predicted to decline in the next two years. These forecasts are based on our prediction model which uses architects as early indicators for developments in the construction industry, and which is based on data that we have been gathering every quarter since 2009. This prediction model has proven itself over the years, and we can clearly see an upcoming decline in construction volumes in the results, but given the uncertainty surrounding the upcoming Brexit, we have to be careful with predicting how large that decline will be. Be that as it may, it is clear that the uncertainty due to Brexit is majorly affecting the construction sector in the UK.
Expectations UK architects Brexit
Amidst all that uncertainty about what form the Brexit will take, UK architects seem quite clear about the effect a hard Brexit will have on the construction sector. Almost sixty percent of UK architects expect that a hard Brexit will lead to a decline of various degrees of the UK construction sector.
European Architectural Barometer Q2 2019 - USP Marketing Consultancy
Shortage of labour
One effect of Brexit that might impact the construction sector is a rapidly increasing shortage of labour. Currently, roughly eight percent of the UK construction workforce consists of foreign EU citizens. A likely consequence of a hard Brexit is the exodus of these workers to the continent. The sudden loss of this percentage might seem easy to overcome, were it not for the fact that the current labour shortage in the UK construction sector is already quite high. Additionally, just like in some other countries, it seems hard to motivate the younger generation to pursue a career in the construction industry in the UK, and meanwhile, due to an ageing population, the skilled labourers leaving the market due to retirement will only increase.
This development is reflected by our results as well. About a quarter of UK architects is currently experiencing a shortage of labour in their own practice, and the same share is experiencing a shortage of labour in the execution of projects, i.e. a labour shortage among contractors, installers and other parties they work with. When looking at architects’ expectations of labour shortage in the near future, however, about 40% of the UK architects expect to experience labour shortage in their own practice and in the execution of projects in the coming five years. Additionally, about half of the UK architects find it likely that contractors will have to outsource work to external parties, and that projects will be delayed due to labour shortage, and 80% find it likely that project costs will go up due to increasing costs of skilled labour.
All in all, architects’ outlook on the future of the UK construction sector seems rather bleak. It is worth mentioning that the interviews the abovementioned figures are based on were conducted in the second quarter of 2019, before Boris Johnson became Prime Minister and increased the odds of a hard Brexit. We can only speculate about what will happen in the next few months, but what is certain is that the uncertainty about Brexit is already damaging the UK construction market, and that UK architects are genuinely worried about a hard Brexit.
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