How would a No Deal Brexit affect the availability of construction labour?

Should construction bosses be concerned?

According to the Office for National Statistics, foreign workers represent just over a third of London’s construction workforce, based on 2016 data. Estimates from the latest Annual Population survey show 7% of the construction workforce from the EU nationally, rising to 28% in the Capital. Given these figures, it is not surprising that Mark Reynolds, CEO of Mace Group, has been talking in the press today about the hit the industry would take in the event of a No Deal, and impact of the proposed new immigration policy.

Brexit-related risks

Kate Benefer, Business Immigration partner at RWK Goodman, comments: “The UK Government has committed to restricting access to the UK for EU workers, in particular those deemed as “low-skilled”, regardless of whether there is or isn’t a deal. Under the new immigration regime, employers will have to sponsor workers from the EU and internationally to work in the UK in the future. EU workers won’t get priority for UK work visas, and employers will have to pay each worker at least £30,000 per annum which is significantly more than the current annual salary for most construction workers.”

“In the event of a No Deal, EU citizens will still be able to come to the UK for work and they will be able to enter the UK as they do now – for a transitional period only. However, to stay longer than 3 months they will need to apply for permission and receive European Temporary Leave to Remain, which is valid for a further 3 years. EU citizens wishing to stay for longer than 3 years will need to make a further application under the new immigration system. While the 3 months’ grace period may be helpful when it comes to seasonal workers, it is unlikely that the construction industry would benefit from it”.

Catherine Welch, RWK Goodman Construction Partner, adds: “The UK construction industry already struggles to maintain a sufficiently skilled workforce. Real pressure is now being felt by contractors on their labour capacity, and they will now more than ever need to understand their related employer immigration obligations to make use of non-UK labour.”

“Whilst contractors may seek to recover some of the associated costs in their tender prices, some employers are taking advantage of the current “buyers’ market” and continuing the squeeze on contractors’ prices.”

“There is a tipping point, however, and employers should beware of pushing for unrealistic prices and programmes, which may inadvertently lead to a delayed and poor quality project, unsustainable supply chain cash flows, and ultimately contractor and sub-contractor insolvencies.”

For advice on allocating Brexit-related risks, including both labour or material shortages, please read our previous article. We continue to monitor and analyse the risks faced by our key sectors as the possible Brexit scenarios emerge.