- Corporate and commercial
Partner - London. United Kingdom
This article was co-authored by Tegan Johnson, Solicitor Apprentice, Sheffield.
COVID-19 prepared the industry for the potential impacts of Brexit in many ways. The issues faced from March 2020 onwards (including delays in imports, shortages of materials, increased prices and labour issues) were, in a sense, pre-empting what might come when the United Kingdom officially left the European Union.
In actual fact, the pandemic caused more disruption over recent months than the end of the transition period did. Although the industry is still in recovery from the effects of COVID-19, organisations are now well used to working in adversity. For the most part, organisations took it in their stride. Indeed, the Brexit deal is generally widely supported by the industry – and averted any possible concerns about a no-deal situation.
Following earlier articles in this series (Part 1, Part 2 and Part 3), we consider the impacts Brexit might have on the uptake and practicalities of modern methods of construction (MMC). In particular, how the changes in our relationship with the EU might affect ongoing and future projects.
The Brexit deal does preserve tariff-free trade with the EU. It certainly goes a long way to preventing the price hikes that many had predicted – which is always positive to future investment and for profit margins on ongoing projects. However, there is now additional paperwork involved, and customs checks for both imports and exports.
This could create minor delays and some additional related costs, although the transition seems to have gone smoothly so far. Despite some general industry-wide shortages, none of these seem to be directly attributable to the end of the transition period.
These changes are minimal, for the time being. It is unlikely that they would be a barrier to using MMC or other innovations; in one sense they are as close to business as usual as one could hope. The deal doesn’t rule out future tariffs or rule changes, so it is likely that firms will have one eye on any possible developments.
Our trade deal with the EU isn’t the only deal to consider; agreements have been reached with over 60 countries to continue trading on the same terms as before the transition period ended.
One issue that may arise in future is a change in the availability of labour. There is potential for the new points-based immigration system to cause some tension in sourcing lower-skilled labourers. The system sets a minimum salary and is intended to increase the proportion of high-skilled, high-earning immigration. This may not be a barrier for employing highly qualified consultants, but is likely to cause issues when trying to employ lower earning tradespeople.
This issue is less likely to affect projects using MMC; generally speaking, even for projects with a UK-based supply chain, less people are required through the life of a project. The factory-based manufacturing process requires fewer people for basic construction, and integration on-site is not only quicker but requires fewer labourers and man hours.
Existing standards for both products and materials are unlikely to remain precisely the same between the UK and EU in future, which is part of the reason for previous worry about a no-deal situation.
For example, the current mutually recognised product standard, the CE mark (used throughout the European Economic Area) will continue to be recognised until 1 January 2022 in most cases; with potential for that to be extended or negotiated over the next year.
While any component manufactured on or off-site will ultimately need to comply with the agreed standards, the ability for large components to be constructed in factory settings is an advantage. The environment can be more controlled, creating better quality components which can be more frequently quality-checked (compared to on-site construction where flaws can go unnoticed and become a latent defect). A factory setting can likely also respond more quickly to any legislative changes.
One of the main reasons for the vote to leave the EU was to diverge from Brussels-led policy and to set out alone. Between the transition agreements, Spring Budget and policy decisions, some priorities of the UK Government are becoming clear.
One of those is the green agenda. Supported by the new UK Infrastructure Bank, the so-called “Path to Net Zero” has been picking up pace. Innovation and sustainability will go hand in hand over the next decade and beyond to ensure the nation is carbon neutral by 2050 – with a particular push expected before COP26.
Private businesses also seem to be embracing this agenda and are not only turning towards more sustainable materials and methods of working, but looking at on-shoring or creating supply chains much closer to home. Eliminating much of the transport involved limits the carbon footprint of projects and can also mitigate shipping-related risks – particularly note-worthy when the items transported are full modular builds rather than simple materials.
Realistically, many of the impacts of Brexit remain to be seen, and some of the examples above may change over the next few years as more details are ironed out and the impacts of COVID-19 wane. The deal could allow for future innovation without lowering standards, and to set our own agenda and reputation as a global powerhouse for MMC. Equally, none of the impacts so far seen have been a hurdle to uptake or use of MMC, which poses no real challenge to this type of innovation.
Perhaps most importantly, the Brexit deal has provided certainty. Where there has been ongoing speculation since the vote to leave in 2016, there is now clarity. This will increase confidence and, hopefully, investment - not only in construction, but in new, innovative ideas.