The pound has plunged to a three-month low as investors fear Theresa May will reveal plans for a Hard Brexit in her long-awaited speech.
Housebuilders are already bearing the brunt of the UK’s stricken currency. According to the Federation of Master Builders (FMB), 70% of UK builders have seen an increase in material prices due to the depreciation of the pound.
The pound has quivered with every mention of the UK leaving the single market, and if Theresa May confirms suspicions tomorrow the pound could call even further.
“Thousands of smaller building firms are grappling with the rising cost of materials caused by the depreciation of sterling since the EU referendum,” said Sarah McMonagle, Director of External Affairs at the FMB. “A quarter of all materials used by the UK construction industry are imported – this is significant and underlines the vulnerability of the industry to sudden fluctuations in the strength of our currency.”
Our survey recently revealed that housebuilders believe a hard Brexit will exacerbate build costs. Mark Farmer, CEO of Cast, has also opined how a hard Brexit will worsen the industry’s skills crisis. “In the face of an increasingly likely ‘hard Brexit’ scenario we risk losing up to a third of the current construction workforce in the next decade,” he said. “This will completely undermine any efforts to expand new house building through using traditional measures.”
The pound closed 2016 at $1.23 US dollars, 16.3% lower than the start of the year. It also fell 13.5% against the euro. “More than 70% of smaller building firms have experienced increased costs as a result of the weakened currency, with additional increases of 10 to 15% expected as the new year unfolds,” said McMonagle.
“Anecdotally, construction SMEs are already reporting an increase of 22% in Spanish slate and 20% increase in timber,” she added. “The combined pressure of higher material prices and the rising cost of skilled labour represents a serious challenge to builders.”
Downing Street has dismissed reports of a Hard Brexit as ‘speculation’.