Brexit and Infrastructure
With Brexit dominating the last two and a half years and the UK’s scheduled departure only 6 months away, it would be good to hear from the political parties on their proposals for the UK’s long-term national priorities in infrastructure, and how they plan to deal with some of the potential impacts of Brexit on the construction industry, who will have an obvious strategic role.
To give some context, over the next 10 years the UK will see the implementation HS2, Crossrail, a third runway at Heathrow, Hinkley Point C (not to mention continued decommissioning at our legacy nuclear sites) and the Thames Tideway Tunnel. These are just the mega projects amongst the £600 billion of public and private investment in UK infrastructure over the same period. This does not even take into account issues such as digital infrastructure or future mobility issues such as autonomous vehicles.
Potential Skills Shortage and Productivity
One impact of the 2008 financial crisis on the construction industry was the reduced numbers of graduates/apprentices/trades joining the industry (understandable at the time). This has led to a general skills shortage, an ageing workforce, with the gap filled by migrant EU workers (RICS data shows that 8% of all construction workers in the UK in 2017 were EU Nationals).
To compound matters, productivity in the construction sector is far lower than the UK average and was reported by McKinsey in 2014 to be costing the sector more than £15bn a year. Whilst there is agreement between the UK and EU that during the transition period, there will (in effect) be guaranteed freedom of movement for EU nationals until 2020, which may alleviate the short-term issues with the supply of labour, it does not solve the medium to long-term issues with the skills shortage and it will be interesting to hear from the parties as to how they will resolve these issues.
For example, whether there are any plans to adapt the Apprenticeship Levy to encourage and promote a greater number of higher and better skilled workers.
In June 2018, the Federation of Master Builders called for an urgent review of the scheme quoting figures that there was a 28% fall in apprenticeship starts between August 2017 and March 2018. FMB’s Chief Executive suggested that as there is a far greater proportion of construction workers employed by sub-contractors lower down the supply chain or even agency workers; larger firms should be permitted to pass on a greater proportion of their Levy funds (currently 10%) onto their supply chain.
The industry has also been calling out for the conclusion and acceptance of the apprenticeship standards by which all apprentices across the industry are to be trained. As at the beginning of this year only 27 of the 75 standards had been approved, despite the process beginning in 2014.
Increasing the number of skilled personnel in the construction industry is unlikely by itself to close the gap in productivity and as several of my colleagues have commented previously (in the following URLs:)
There will be a need for the industry to invest, develop and adopt new technologies that drive productivity. As well as addressing skills shortage, these new technologies can help improve health and safety on worksites, increase efficiency as well as reduce the industry’s carbon footprint.
As the biggest procurer of construction services, the Government has sought to use its buying power to drive such efficiencies by announcing in the November 2017 Budget statement that it will prioritise the use of offsite manufacturing on all publicly funded projects from 2019.
The Government has also announced the £170m investment in innovation and productivity through the Industrial Strategy Challenge Fund for research into new construction processes and techniques."
Whilst these policies may be welcomed by the industry it will be interesting to hear from all political parties on their approach to these issues and commitment to such policies despite the outcomes of Brexit.
Membership of the EU allowed for free movement of goods within the EU without duties and other restrictions such as rules of origin checks. As a result, cross-EU supply chains have developed and UK companies have the advantage of a deep market for specialist products, raw materials, construction technology and specialist machinery. In February 2018 the Government reported that 62% of all imported construction materials came from the EU.
Although the UK and EU are aiming for a deal that maintains tariff-free trade, there is uncertainty within the industry and this can lead to price fluctuations and suppliers pricing in risk for currency fluctuations."
Given that major infrastructure projects are delivered over decades and the criticality of construction and infrastructure to the overall UK economy, it will be interesting to hear whether there are any clearer messages and policies from the various parties over the coming days on how they intend to deal with tariffs on construction-related materials and products.
Through the European Investment Bank, the UK’s construction sector has benefited from long-term loans at attractive interest rates to enable a wide range of projects from new transport, water and energy schemes, to schools and hospitals as well as major projects such as Crossrail and the Thames Tideway’s ‘super sewer’. Between 2012 and 2016, the EIB financed £31.3bn of public infrastructure projects in the UK in 2016.
However, post-Brexit, the UK and projects located in the UK will no longer be eligible for EIB financing.
Many industry bodies and individual companies have called for the UK Government to implement policies designed to protect and encourage the investment in UK infrastructure. For example, the Institution of Civil Engineers has recently suggested that the Government adopts a UK Guarantees Scheme to underpin a privately owned and financed bank, supported in a similar way to the German investment bank KfW, with a similar mission to the EIB. Without adequate and affordable financing, the UK’s infrastructure projects may well stall or simply be shelved and we await clear guidance from the all political parties on their proposals for ensuring the delivery of the projects listed on the National Infrastructure Pipeline.
TL4 Fire Starters
Join us for a Festive FIRE Starters evening ahead of FIRE Starters Global Summit with our expert panellists.
Women in Chancery Christmas Celebration
Join us to celebrate the festive season and discuss the busy year we have had.
Alexia Egger Castillo
Inheritance contracts: An unknown planning tool for Brits with assets in Switzerland?
How you choose to dispose of your estate after death requires careful consideration, especially where assets are in multiple jurisdictions
FT Ignites Europe quotes William Garner on the FCA's approach to founder-led firms
"Taking a very strict line on founder-led firms risks undermining the FCA's competition mandate..."
Paula Boast is interviewed by Construction Week on Bahrain's construction industry and how it is moving towards more functional and responsible building
Dissecting Bahrain's construction practices
HR Magazine quotes Nick Hurley on redundancy and employee rights
"Unfortunately the legal remedies for employees in companies that become insolvent are very limited"
Construction News quotes David Savage on the slight rise in construction output in September
"It remains to be seen how the sector reacted in October amid the political turmoil"
How final is a Final Certificate?
A recent Scottish case grappled with the complexities of a smash and grab adjudication.
Court of Appeal decides defective notice to quit not saved by 'Mannai' principles
The Court of Appeal handed down judgment in the second appeal in O G Thomas Amaethyddiath v Turner & Ors  EWCA Civ 1446.
Charles Russell Speechlys wins Best Legal Services: Private Equity – Pan – Africa at the AGF Service Providers Awards 2022
Best Legal Services: Private Equity – Pan – Africa at the AGF Service Providers Awards 2022
Sarah Jane Boon
The Independent quotes Sarah Jane Boon on the 9.6% divorce increase in 2021
ONS statistics - Divorces in England and Wales: 2021
CDR – Essential Intelligence: The Belt and Road Initiative
Of the BRI nations situated within the Gulf, the UAE stands to be a leader and consolidate itself as the trade hub of the Middle East.
Jurisdictional Challenges in Arbitrations in Qatar
Exploring jurisdictional challenges in arbitrations within the State of Qatar, both under Qatar law and the law of the QFC.
Non-payment: What’s a Contractor to do?
Payments to contractors are widely subjected to extensive delays.
JCT v NEC: Which contract is right for your project?
Unsure of what building contact to use. Learn the difference between NEC and JCT contracts with our guide.
Michael Powner and Ellen Roberts write for People Management on the benefits and drawbacks of novel compensation packages
The benefits and drawbacks of novel compensation packages
Henry Cuthbert writes for Law in Sport on Usain Bolt's move to trademark his legendary victory celebration
Trademarked For Success – What Can Athletes Learn From Usain Bolt’s Legendary Victory Celebration?
Q&A: Code rights queries answered
Samuel Lear and Jonathan Wills field Telecoms Code questions in the light of a recent Supreme Court decision.
Charles Russell Speechlys advises Sage on sponsorship deals
Charles Russell Speechlys has advised Sage, a global leader in software technology, on a series of high-profile partnership deals
Private Equity News quotes Darren Bailey on the Americanisation of UK football
“We’re seeing an Americanisation where the matchday is turning into much more of an entertainment beyond just the sporting spectacle”