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As we reach the apparent conclusion of Brexit negotiations, Paul Groves asks what sort of Game Show the construction industry finds itself in

From the Generation Game through to Pointless, it is hard to escape the fact that our increasingly painful Brexit can quite conceivably be categorised by the titles of great British TV gameshows.

We currently seem to be locked in a prolonged state of limbo as the supposedly crunch final talks have now been extended once more.

But if you look beyond the “will we, won’t we, have we, can we, why can’t we” tone of the negotiations and their aftermath, it is the impact of Brexit that remains the central unanswered question.

The Government appears unaware that Every Second Counts

Paul Groves Paul Groves Editor of Specification magazine

Fragile confidence

By and large, business confidence seems fragile to say the least.

The head of Jaguar Land Rover has warned of potentially tens of thousands of jobs being lost through Brexit and now the CBI has released research showing that eight out of ten businesses in the UK say Brexit has hit investment as the speed of talks is outpaced by the reality firms face on ground.

The survey of 236 firms, representing 101 large companies and 135 SMEs, also revealed the majority will implement damaging contingency plans in the absence of greater certainty on Brexit by December.

Carolyn Fairbairn, CBI Director-General, warns ‘the speed of negotiations is being outpaced by the reality firms are facing on the ground’. And almost one in five firms say the point of no return for triggering their plans has already passed.

Contingency plans include cutting jobs, adjusting supply chains outside the UK, stockpiling goods and relocating production and services overseas.

Businesses’ reluctance to invest will have a knock-on effect for jobs, wages and living standards. Investment is a pillar of productivity, where the UK already trails its international peers.

Planning for No Deal

Many firms are now planning for a ‘no deal’ scenario, the survey adds, with severe implications for people’s livelihoods on both sides of the Channel.

And yet whilst business confidence is fragile, construction industry analysts Glenigan insist that there are signs that some key construction sectors could prove resilient or even gain from a hard Brexit.

The prospect of congestion at the ports – particularly Dover - and an end to ‘frictionless’ trade may create tender opportunities as UK ports invest more in upgrading and enhancing their facilities.

To date, Brexit has not deterred investment on the quayside. Last month ABP, Britain’s largest port owner, unveiled proposals for Humber International Enterprise Park.

The value of the Pound

The weaker pound ushered in by Brexit could also provide a further lift to the numbers of tourists visiting the UK, giving a boost to hotel construction programmes.

For now, the pace of expansion at budget hotel chains shows little sign of slowing. New hotels capacity is also being built in the regions.

The prospect of Britain leaving the EU customs union could also provide a spur to the domestic industrial building/logistics sector, particularly as manufacturers and retailers seek to maintain larger volumes of components and supplies closer to home.

Although the national picture is mixed, the demand for warehousing and logistics space is continuing to expand in key manufacturing regions.

Construction decline

But Brexit uncertainty continues to drive expectations for the sharpest construction decline in the commercial sector, particularly felt in the offices sub-sector, says the Construction Products Association (CPA).

Investors have signalled the uncertainty is too high to justify significant up-front investment in new floor space for a long-term rate of return, and output is expected to fall 10% in 2018 and a further 20% in 2019. 

Noble Francis, Economics Director at the CPA said: "The forecasts assume that the UK and EU will agree a deal on Brexit towards the end of the year but the continued uncertainty over a ‘No Deal’ Brexit has already had a big impact on construction new orders in construction sectors dependent on high upfront, often international, investment for a long-term rate of return.

“These include the construction of prime residential in London, industrial factories and commercial offices towers. Even if the UK government eventually agrees a deal with the EU on Brexit, construction output in all these sectors is expected to fall sharply during 2019 due to falls in new orders, which have already occurred in the past 18 months, feeding through to activity on the ground.”

Disastrous consequences

The Royal Institute of British Architects (RIBA) has warned that a Brexit no deal would have disastrous consequences for architecture.

RIBA Chief Executive, Alan Vallance claims the Government’s outline plans for a no deal Brexit would create a country that pulls up the drawbridge, instead of being open for business and skilled talent from around the world.

“The Government need to set out a clear roadmap for what registration will mean in practice as a matter of urgency,” he added.

“With so many EU architects working in the UK, it is good that those already registered will have assurance. However, we urge those not registered or about to finish a qualification to ensure they register as soon as possible.”

As business continue to seek progress, the Government appears unaware that Every Second Counts.

Indeed, the media coverage from home and abroad on all things Brexit continues to conjure up memories of It’s a Knockout rather than Mastermind.

Paul Groves is Editor of Specification Magazine.