Headwinds in development - Brexit
What is the attitude of the industry generally?
So far the polls have shown that the majority within the industry are in favour of remaining within the EU. Support to ‘remain’ is, however, by no means unanimous. Some have stated that a departure from EU regulation could free up the manoeuvrability of SMEs within the sector and reduce the costs they incur.
Potential problems to face from Brexit?
The EU has introduced important individual legal measures that impact upon construction and infrastructure projects such as environmental and health and safety laws. It is uncertain what status these will have pending a Brexit event. The possibility of change to these laws (such as the obligation to conduct an environmental assessment) is likely to affect project management and planning.
2. Access to labour
A particular worry of those involved in the construction industry relates to the availability of both skilled and non-skilled labour within the UK. Many are concerned that the industry relies heavily on the EU for the provision of its workers and that this supply line could be choked off in the event of a withdrawal from the EU.
3. EU funding for projects
Many projects in the UK are funded wholly or partially from EU sources such as the European Investment Bank. Britain is one of the EIB’s four largest shareholders, holding about a sixth of its equity. Brexiteers would no doubt point out that this does not rule out future investment by the EIB but merely flags it as a possible area of uncertainty.
4. Market access in other Member States
Businesses currently benefit from the provisions on free movement of goods, services, workers and capital in the EU, which enables them to take up opportunities within other member states. The level of flexibility open to cross-border operations will depend very much on the terms of any free trade agreement reached between the UK and EU. Pivotal to market access for EU opportunities are the rules on public procurement, which have required the opening up of bidding for major public contracts to the whole internal market on an equal and transparent basis.
5. The effect of departure from the EU on foreign direct investment
The EU treaties also provide a framework for the free movement of capital, making it easier for external private operators to invest in UK companies and projects. The prospect of our departure from the EU has caused some alarm among multinationals with established interests in the UK.
6. Environmental Legislation
The Single Environmental Assessment Directive states that environmental assessments must be carried out for specified plans and programmes. Post-Brexit, it is unclear whether the Government will continue to require such assessments to be conducted. The issue is one of immense importance as assessments can extend the time required to complete an infrastructure project and a failure to complete one satisfactorily can lead to a legal challenge and related delay.
If the UK votes to leave, it is unclear whether the Government would move to repeal these measures. Whilst a degree of deregulation would be welcomed by many, it would be unpalatable to others. Further, it would require the UK to leave international treaties, such as the Aarhus Convention, on which many of these legislative measures are based in any event. Politically that could be very difficult.
The headwinds faced by the development industry in the event of Brexit have considerable force. This does not mean, however, that they should blow the industry off course. It does mean that businesses will need to take heed of possible future developments and consider how they might adapt should Brexit happen.
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