16 Jun 2016

The construction sector's voice in the Brexit debate has been relatively muted. There are notable exceptions to this, Lord Bamford, Chairman of JCB is a high profile advocate for an out vote. Building magazine is pushing a #BuildingSaysIN campaign.

Surveys of the industry appear to suggest that it is in favour of the UK remaining a member of the EU. Smith and Williamson's 2015 survey of the property and construction industry revealed that only 15% of those polled believed that Brexit would have a positive impact on the sector. Building magazine's survey of construction professionals showed that 63% of those surveyed were in favour of remaining part of the EU.

So why is the industry not arguing more loudly for the Remain campaign? One reason may be that there is actually much wider divergence of opinion that surveys of executives and professionals may represent. Another may be that the effect of a Brexit on the construction sector in the UK could be both enormous in some respects, and negligible in others.

This article looks at some of the potential effects of a Brexit on the UK construction sector: labour; standards; and the implementation of EU legislation.

International labour force

The construction sector is hugely reliant upon skilled immigrant labour from the EU, perhaps more than any other sector except agriculture. In the absence of the free movement of workers from the EU, the cost of construction in the UK will rise. In addition and perhaps even more significantly, the UK's infrastructure pipeline will become impossible to deliver because demographic changes in the UK mean that there simply are not enough skilled workers entering the construction workforce. Could the sector have delivered the 2012 London Olympics without this labour? Will the sector be able to deliver future mega-projects like EDF's new nuclear plant at Hinckley?

The counter-argument is that what is good for employers has been bad for workers. The UK official unemployment rate has remained stubbornly at 5.1%. Conversely, government data shows that wages in the construction sector have been growing at a faster rate over the last 12 months than at any time since the 2008 financial crisis. That suggests that those with skills (from anywhere in the EU) are becoming more able to capitalise upon them in the UK market, and the UK needs to focus on skills and training in order to allow UK nationals to meet the industry's demand.

International standards

Design and manufacturing standards are international. Construction materials imported to the UK will almost certainly comply with EU standards, and construction materials manufactured in the UK will need to comply with EU standards if they are to be exportable. Similarly, design standards are international. The UK has been working through a process of conforming British standards to the EU's Eurocodes – e.g. British Standards for the design of structures implemented the Eurocodes in 2010. Whilst there may be no legal reason for the UK to continue to implement these standards, it is difficult to see why the British Standards Institution would seek to turn the clock back, or allow the UK to fall out of step with the rest of Europe.

Similarly, the EU's Construction Products Regulation lays down harmonised rules for the marketing of construction products in the EU. It provides a common framework for the testing of construction materials and a common method for reporting the results of those tests. The advantages of this legislation are clear: it should permit materials to be sold anywhere within the EU on the basis of a single set of tests (which is of benefit to exporters) and it provides a common means of describing the qualities of materials which should encourage competition (which is of benefit to importers). This is an example of a piece of legislation which would the UK is likely to retain in any scenario. If the UK stays in the EU, it will be a legal requirement, if it leaves the EU but agrees a treaty to access the common market it is likely to be required to conform to the regulation by that treaty, and if it leaves it is quite likely the UK would choose to implement the legislation in order to simplify trade.

A Brexit carol

Legislation past

From a purely legal perspective, the impact of a Brexit would be less apparent and certainly less immediate. EU legislation can be directly effective, but in the UK it is almost always implemented via UK legislation. The UK is one of the most compliant states in the EU so the UK would therefore need to actively repeal or amend UK legislation implementing EU legislation before the law in the UK changed. To take a specific example, the Work at Height Regulations 2005 implement European Council Directive 2001/45/EC. It is unlikely that the UK would devote resources to amending this.

Legislation present

One piece of EU legislation that a future government may choose to set aside is the Energy Performance of Buildings Directive 2010. This is the directive that gave rise to Energy Performance Certificates ('EPCs'). It also imposes an obligation on EU member states to ensure that:

  • after 31 December 2018, all new buildings that are occupied and owned by a public authority, are nearly zero-energy buildings; and
  • by 31 December 2020, all other new buildings are nearly zero-energy buildings.

Whether or not a post-Brexit UK Government would seek to set this aside is probably dependent upon the importance it attaches to its green credentials.

Legislation yet to come

Following the Brexit, the UK would need to negotiate a series of bilateral trade agreements with the EU in order to access the Common Market. The experience of Norway and Switzerland suggests that these agreements will require the UK to implement a lot of EU legislation in any case (without the benefit of having had a hand in writing it). It is therefore likely that not only would the UK retain existing EU legislation, it would be obliged to continue enacting it.