Deal or no deal? Housebuilders share their fears on Brexit

September 21, 2018 / Isla MacFarlane
Deal or no deal? Housebuilders share their fears on Brexit

With less than 200 days to go until housebuilders have to start building outside the EU, the likelihood of a ‘no deal’ Brexit has gone from an empty political threat to an increasingly likely scenario.

Mark Carney has already warned that houses would see 35% of their value erased overnight if the UK walk away from the bloc without any agreement. Now, housebuilders are warning that we have more to fear than a loss of confidence in the market.

“Over recent months, as the likelihood of “no-deal Brexit” has increased we have seen buyer interest wane as they sit on their hands in light of the uncertainty,” Parul Scampion, COO Fruition Properties said. “Combined with the increasing cost of materials alongside the skills and labour shortage that is already materialising, we’re in danger of housebuilding grinding to a halt altogether if we don’t think about this seriously.

“We should take heed of the multiple voices within the business and amongst financial forecasters who have warned us of the significant risks of a no-deal Brexit; this outcome would affect the appetite for investment and would lead to more sites being mothballed and fewer site acquisitions made.”

However, some developers simply want the foundations for Britain’s future laid – however shaky they may be – so they have something to build on.

Will Herrmann, CEO and Founder of West Eleven, said, “For us as developers – and the nation as a whole – we just need to get to the finish line. The whole mechanism, and particularly luxury property, has been held back for the last two years. Buyers and sellers have put off decisions, waiting to see what happens.

“At this point, everyone just needs to know what the rules of the game are going to be; once that becomes clear – one way or another r–  the market will be able to move forward and make decisions.”

As disastrous as some may think a no deal scenario would be, the wrong deal would be even worse. This week, the Migration Advisory Committee report advised an end to free movement from the EU.

The report states that if freedom of movement was to end after Brexit, and a Tier 2 visa system implemented, the migration of “low skilled” EEA workers would become dramatically harder.

“The British construction industry relies heavily on migrant low skilled EEA labour, and this has grown in recent years especially from the EU2 countries such as Romania and Bulgaria,” said Mark Farmer, chief executive of Cast and author of an independent review into the capacity on the construction industry. “In London, approximately 10% of the construction workforce sits in this category with many EU migrants doing work that UK nationals increasingly do not want to do.

“It is interesting that seasonal agricultural workers have been called out as a possible exception in this report but not construction. This clearly says to me that the government is effectively forcing construction to develop a higher productivity model and modernise, breaking free of its archaic labour-intensive techniques.

“The biggest risk facing construction is that despite this muscular approach starting to force the issue of reducing its labour dependency, the industry will not be able to adapt quickly enough and will face a real squeeze on near and mid-term projects, which may even call into question the deliverability of some of the government’s housing and infrastructure plans.”

According to the Federation of Master Builders (FMB), the recommendations for the new immigration policy post-Brexit would cripple the construction industry.

Brian Berry, Chief Executive of the FMB, said, “Its recommendations ignore the pleas of construction employers who have called on the government to introduce a visa system based on key occupations rather than arbitrary skill levels.

“Instead, the proposal is to apply the Tier 2 immigration system to EU workers, which would be disastrous for small and micro construction firms. Even if tweaked and improved slightly, the Tier 2 system would not make provision for ample numbers of low skilled workers to enter the UK and these are people the construction industry relies upon. It’s not at all clear that EU workers with important skills already in short supply, like bricklaying and carpentry, will not fall foul of a crude and limited definition of ‘high skilled’ worker.

“In addition, the report explicitly recommends that there should be no migration route for lower skilled workers with the possible exception for seasonal agricultural workers. There is also a vague suggestion that if there was a route for lower skilled workers, it should be aimed at younger people and not be open to workers of all ages. This is far too restrictive and simply won’t meet the needs of the construction industry.”

It isn’t just so-called low skilled labour that the industry has to worry about. The Royal Institute of British Architects (RIBA) has warned that the recommendations would have consequences for those higher up the food chain.

RIBA Chief Executive, Alan Vallance said, “The recommendations in today’s report would have profound implications for architecture. It is disappointing that the Committee has recommended introducing a £1000 Immigration Skills Charge to employ EU nationals and that it has not moved on the onerous salary threshold. Both of these measures will hit smaller practices the hardest.

“RIBA’s research shows that the current administrative burden on people and practices is unacceptable – a situation where that gets worse is extremely worrying. Last year, we published our first policy report on the immigration system, it was clear then that the administrative burden does not support the UK’s globally focused architecture sector. The vast majority of RIBA members think that international talent is vital for the continued success of the profession.”

Housebuilding is notoriously vulnerable to sentiment and it needs political certainty to build on. However, it also needs labour, affordable materials and able buyers. If the UK can’t provide this via an agreement with the EU, it must find a way to ensure it on its own.

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