'Twas the Night Before Brexit....Will We Still Have a House?Back to All News
By Lori Taylor
The eve of Brexit…..What is happening, what is going to happen, what impact will it have on us? As of today, there is still no clarity about what will happen - a deal agreed, no deal, a long extension or revoking Article 50?
What impact could there be on the Construction industry and recruitment? The CBI estimates the construction sector has a GVA (Gross Value Added) of £102.3 billion and employs approximately 2.2 million people. According to construction industry experts Glenigan, the 2019 construction market is forecast to contract by 2% with a modest recovery expected for 2020.
One way to assess the overall health of the economy is to look at housebuilding and larger infrastructure projects, dependent on the confidence of buyers and investors. Confidence of investors has declined due to slow economic growth and uncertainty surrounding Brexit. The OBR has estimated the UK economy would have grown by an extra 2.5% had there not been Brexit uncertainty (Source: Glenigan). And what about a No Deal Brexit? There are fears it would have a very detrimental impact on the economy and the construction industry. There would be an additional decline in business investment, the housing market could weaken and there would be less private housebuilding. Construction materials might be more expensive and harder to import if there are delays at customs. Then there is the impact on the labour market and skills to consider, especially as the construction sector employs many non-UK origin people.
Conversely falling private investment could mean higher public sector spending and investment to offset this, and projects being brought forward. Build to Rent developments are also expected to grow as consumers look to rent rather than buy, and the continuation of the Help to Buy scheme should encourage confidence. The warehousing and logistics industry is set to benefit as the demand for space increases due to online retail as well as companies looking to negate any possible supply chain issues that could arise. Amazon, for example, has a new warehouse near Chesterfield, work is currently underway on a new space near Darlington, and an additional facility is expected to commence near Durham.
What do some Senior Leaders at Linear Recruitment think?
According to Geoff Taylor, Linear’s Operations Director based in the North East, it’s the uncertainty that is causing the issue. How, when and if the UK leaves the EU will affect the Construction Industry over the short and long term. “The North East in particular benefits from a large amount of EU investment, £1.1bn between 2011 – 2016, and therefore this may have a negative impact on regeneration and infrastructure projects” Geoff says. “In the short term, the lack of clarity on how and when (or if) the UK will leave the EU has had an impact on the confidence of some end clients to start schemes”.
Geoff is also concerned about the impact on the labour market. In the North East, there isn’t a large dependency on foreign labour, but Geoff believes this could have a big impact on the recruitment industry in terms of site staff where there is a larger dependency, for example in London. “The UK relies heavily on us being part of a single market. A shortage of workers and skills would then lead to higher project costs as demand outweighs supply, as well as impact on project timescales.”
Geoff adds “In terms of demand for Recruitment Services it really depends on the terms of the exit and how that translates into consumer and client confidence”.
Adam Turner, Linear Recruitment’s Chairman, also shares concerns about the uncertainty. “I think we just need an answer and a solution” he says. “It isn’t doing the UK any favours, which is what is impacting on confidence in us as an economy. There has to be some decisive action, then we can get on with it.” Adam understands that there could be labour availability issues, but what he also believes is that people will become more valuable to the market place, and this could bring some opportunities.
Gareth Tomkins, Linear Recruitment’s Managing Director, also offers his thoughts. “As a Company, in the first quarter of 2019 we have experienced a very good start from our permanent recruitment divisions. This may suggest that clients are concerned about a shortage of skilled staff post-Brexit and so are acting now by employing staff on a permanent basis.”
He adds “I am also under the impression that due to the economic uncertainty companies are currently investing in staff rather than equipment as they are cheaper and can also be reduced if there is a downturn. This is obviously something that as a Recruitment Company we are taking advantage of. It will also help explain the current Employment rate being at its highest since 1971.
“No one can really predict what post Brexit looks like” Gareth asserts. “Will inflation increase? What will happen to interest rates and the pound? In the construction industry at present there appears to be a lot more so-called ‘Zombie’ companies and the industry is already experiencing a large number of insolvencies in 2019. If the construction sector growth does contract post-Brexit or interest rates increase, we could see a lot more of these ‘Zombie’ companies losing the battle and falling into the hands of the liquidators. This is a major concern for Linear and should be for the rest of the construction industry”.
Clearly Brexit is a subjective matter, and we simply don’t yet know what might and will happen and when it might be. Whatever the outcome and impact of the UK leaving the EU, Linear will be focussed on providing Clients and Candidates with a first class, truly consultative service based on our key values and work ethic.