What would Brexit mean for the construction industry?

Less than a week after a £260m project to add a 10-storey extension to Tate Modern on London’s South Bank is complete on 17 June, Britain could have voted to leave the European Union.

British voters go to the polls on 23 June to decide whether we end our 43-year membership of the EU or not.

Buckingham Palace insists the Queen is “politically neutral” over the EU referendum, and ProSkips takes a similar stance to Her Majesty.

But those in the construction industry who want to remain in the EU argue that membership is crucial to plans to improve Britain’s infrastructure.

They point out that membership allows British construction companies to recruit workers from other EU nations that we need to address our skills shortage.

Remaining in the EU also encourages overseas investment in British construction projects, according to Europhiles, and the much talked about Brexit would bring an end to the construction industry’s recovery because it would prevent free trade.

On the other hand, plans by China to invest £100bn in UK construction has nothing to do with whether we are a member of the EU or not.  

JCB chairman Lord Bamford – a vocal supporter of the Brexit campaign – has been quoted as rubbishing the scare mongering of those who insist it would make trade far more difficult with other European nations. He insists it is in everyone’s interests to trade openly and freely.

Exit agreement

Only one member state has ever left the 28-nation EU since Belgium, France, Italy, Luxembourg, the Netherlands and West Germany established the European Economic Community in 1958.

As a part of Denmark, Greenland joined the EEC in 1973. After home rule for Greenland began in 1979, the territory voted to leave the EEC in 1982 and its exit was agreed in 1985 following lengthy negotiations over fishing rights that resulted in the Greenland Treaty of 1984.

But as a member of the Association of the Overseas Countries and Territories of the European Union, Greenland remains subject to EU treaties.  

In theory, Britain could leave the EU in a single day by repealing the European Communities Act 1972 and its numerous modifications and amendments.

However, Article 50 of the 2009 Lisbon Treaty – the document that governs membership of the EU – states that any country wanting to leave the EU must negotiate with the 27 other member states about the terms of its withdrawal.  

The Lisbon Treaty allows member states up to two years to come to an exit agreement or face leaving without securing a free trade agreement or any other benefits EU membership brings.

A government report on the process for withdrawing from the EU, which was released in February, acknowledges that “uncertainty during the negotiating period could have an impact on financial markets, investment and the value of the pound, and as a consequence on the wider economy and jobs”.

But because Article 50 of the Lisbon Treaty has never been put to the test, we can only speculate about the effects of this uncertainty.

Economic powerhouse

In macroeconomic terms, EU membership is virtually irrelevant for the UK.

This is because we are both an economic powerhouse and the value of sterling is not tied to the euro, according to Financial Times columnist Wolfgang Münchau.

He goes on to explain that the EU budget is tiny when compared with the UK government’s other fixed costs and free trade and free capital movement is highly likely to continue whether Britain leaves the EU or not.

It’s not unreasonable to say the greatest threat to the construction industry that Brexit poses is the two-year period Britain would need to negotiate the terms of its departure from the EU.

But this offers opportunities for investors from overseas. The weakening value of the pound, caused in most part by speculation over Brexit, is already taking place.

In March 2015, £1 was worth over €1.41. Today, it’s worth closer to €1.25.  

It is possible, therefore, that overseas investors will keep the British construction sector buoyant, while workers from the Eurozone will be keen to come to the UK because they will earn more.

Whatever the outcome of the EU referendum on 23 June, the drive to reduce construction costs will continue. To get the best price on skip hire get a quote from ProSkips now.