How Will Brexit Impact The Property & Construction Sectors?
I think everyone agrees that Brexit will have a significant short-term and medium-term impact on the property and construction sectors, as economic disruptions always come with uncertainty, and there are numerous risks associated with this.
The initial impact of Brexit was to stagnate house prices following the referendum result in 2016, with the annual monthly change dropping from 8.2% in June 2016 to 0.8% by the end of November 2019. Obviously, there are many factors that impacted on this, Brexit being just one of them. With Boris’s large majority win at the end of the year, we were all optimistic that a Brexit deal would be done well before the deadline which would impact favourably on the property market. Then Covid-19 struck…
Contrary to initial concerns, the construction industry showed remarkable resilience last year and was able to deal with the challenges that Covid-19 presented. It is hoped this will continue in 2020 as the UK has now left the EU. Being the eternal optimist, I can see the industry having to adapt to the possible labour shortages post-Brexit and, along with economic and political pressure to raise productivity, this is already pushing the industry to increase offsite construction.
In their latest report, the CIOB identified this labour shortage as a major obstacle to the market and forecast that “over the next decade or so we should expect to see a big loss of construction workers as a cluster in their late 40s and early 50s reach retirement age, which for many in manual trades is before the state pension age. Their immediate successors are fewer in number.” and that “about half of London’s construction workforce is non-UK born, with 37% of the workforce hailing from other EU countries. This has been a major source of new recruits to the industry in recent years.”
Brexit presents a major problem to the industry as it’s unclear how many of the current workforces from overseas will leave the UK post-Brexit and whether the industry will still be able to recruit from Europe. This could result in a major labour crisis. Companies are therefore having to work to reduce the need for labour, to make it less labour intensive, and they are looking at factory-based prefabrication, or “offsite construction”.
It is hoped that this will be one of the positive legacies of Brexit on the construction sector, to promote the use of modern methods of construction and increase the use of digitisation to revolutionise the construction industry.
And what about the property sector post Brexit?
I don’t think there will be an impact post-Brexit but post “Brexit and Covid-19”. Confidence in the sector has remained high and property prices actually continued to increase in 2020. The government will be looking to kick-start the economy this year and some are even predicting negative interest rates! I’m not convinced however if this happens, it will encourage more people to upsize and assist more first-time buyers. We’ll need to wait and see what the fall-out of Covid-19 is over the next 3 – 12 months, what government policies are put in place to maintain a strong UK economy and the impact of these on the pound. Very uncertain times but at least we have a deal!