UK votes to leave EU and face consequences 23 Jun 2016

It is OUT! The UK has decided to leave the European Union, to renounce its membership of the Union.

With so much debate about the pros and cons, risks and benefits in support of a vote either way, the way forward now for a UK outside the EU is difficult to forecast and the impact of the situation on planned infrastructure projects in the UK, including major tunnelling projects hard to predict. EU companies - consultants, contractors, equipment and materials suppliers and other EU service provider companies - have made considerable contribution to recent and current tunnelling projects and are expected to do so for planned projects. What though is the likely consequences of this referendum result? The following are some of the points that could be considered in looking towards this changed future.

TunnelTalk invites comments from readers about the result and the potential aftermath of the changed face of the European Union, through either our Feedback facility or via the online survey. Response comments will be collated and published as they come through.

In opening the debate, the considerations affect different sectors of the industry and perhaps in the following ways.

Project programming and funding

In reporting of major infrastructure projects over the past decades across Europe, many confirm significant amounts of funding sourced from the European Union. Metro systems in many EU member nation cities, road and rail tunnel projects and water and drainage infrastructure across all member nations have received funding from the EU. This includes current projects in the UK, including Crossrail, the Thames Tideway sewer project, and upcoming significant tunnelling projects for the Brenner Baseline Rail Tunnel, the Lyon-Turin rail link, and projects also in non-EU European countries including Norway and Switzerland to improve international and trans-continental transportation connections.

Some will argue that the UK provides disproportionately more to support projects in other European countries via its contribution to the European Union than it receives in return, but would that source of funding dry up for the UK if it were to leave the EU and should that be a concern either way?

Many would agree that most of these regulations and requirements for the safe construction and operation of underground infrastructure is good and would be further developed and introduced whether the UK is in or out of the EU. Others would say it is an interfering influence that doesn’t always apply in individual cases.

As an example, the ex-Mayor of London, Boris Johnson, a Brexit campaigner and tipped as a possible future British Prime Minister, made the claim in an interview that two years were spent arguing with Brussels about the internal diameter of the Crossrail project tunnels in London, saying that the EU was insisting that the diameter needed to be half as large again in order to accommodate (at some distant later stage), the possibility of European high speed trains (the ICE of Germany, the TGV of France, etc.) running through them.

As Johnson stated, as a closed rail system the possibility of other rolling stock systems being able to use the Crossrail infrastructure is highly unlikely and the enlarged diameter on the tunnels would have cost the project many millions more than its near £15 billion price tag (including a £1 billion loan from the EU’s European Investment Bank). Crossrail infrastructure and rolling stock is project-specific and is not even compatible for integration of through services with existing UK railway systems at either end.

The statement has not been verified - perhaps someone associated with Crossrail could comment – but if it were the case, we can look back at the issues that surrounded the integration of the Channel Tunnel with the Continental rail systems on the French side, and also on the rail systems on the UK side which were for several year non-dedicated rail lines. This has since been upgraded with construction in the UK of HS1, with extensive lengths of tunnelling, and now with the planned extension of the network with HS2, also with extensive tunnelling involved.

Would these major infrastructure projects be better off with or without the input of the European Union?

Consulting and design engineering

The UK is often described now as a predominantly service-based economy but what is the value of the services offered by UK tunnel engineering companies in other EU countries? Very little is perhaps the answer. Few UK consulting firms list EU tunnelling projects in the top set of their portfolios so perhaps a ‘leave’ vote for the consultants would not have significant impact on UK consultants working in the EU.

But look at the situation in reverse.

Look into the engineering teams of all the main tunnel consulting firms in the UK and there is to be found many skilled and well educated engineers from EU member nations – from Spain, Germany, Austria, the Czech Republic, Italy, Greece, and others. There are also several European companies that have successful engineering practices in the UK, while the reverse is also rare for the tunnelling industry specifically.

Perhaps the root reason is the language issue. The UK places little to no emphasis on learning a second language for professional fluency, while in European countries learning a second language, more frequently English, is a requirement in grade school and becomes a priority into adult professional life. European engineers are fit to fill professional positions in the UK while few in the UK are equipped to operate successfully in European countries. Both, it has to be said, have the same possibility to work in each other’s countries via the free movement of people (intended originally as free movement of professional workers) across an EU without borders.

Construction

The same is true in the construction industry. If one looks at the contracting teams that are completing the Crossrail project in London, currently working on the Thames Tideway super sewer tunnel project, and shortlisted for the York Potash project among others, major EU country construction companies are the principal joint venture partners, among them Ferrovial and Dragados of Spain, Vinci of France, Hochtief of Germany and Skanska of Sweden.

With these European companies come their senior managers and skilled operatives, all moving across the EU zone without work permit restrictions or barriers. This is to be praised rather than bemoaned. Would the UK have the capacity to complete these projects without the input of extra capacity from its European neighbours, and what would be the situation should the UK leave the EU? The possibilities of European-based joint ventures would become more difficult to establish and manage is the suggestion.

On the other hand, there will be comment in rebuttal that the UK plays by the EU rules and does open its doors to the operation of other EU member nation companies operating in the UK marketplace; while it is nigh on impossible in other EU countries that are considered determinedly closed to external (foreign) contractors and consultants.

A possible Brexit could also have significant impact on the industry equipment and materials suppliers particularly if tarrifs were to be imposed on the import of goods to the UK. There would be impact also to the agents who represent European manufacturers and materials suppliers - or would it?

Another impact that has been flagged by academics in the UK would be the impact on the funding and collaboration by the UK in EU sponsored research and development projects. What is the scope of that participation and what would be the impact?

Considering all these issues, the decision on whether to leave the EU or remain within the Union is a conundrum for those of us with a vote. In addition to the arguments by politicians, economists and experts trying to persuade us either way, there are also the personal experiences that play a part in our decision-making; and for TunnelTalk there are two points to make.

Last week we were in Germany at the factory of TBM manufacturer Herrenknecht to witness the acceptance testing of the last of four TBMs headed for the Follo Line project in Norway. At that event were senior managers of the Norwegian project owner, the Norwegian Rail Administration; the contractor, the Acciona/Ghella Joint Venture; and the manufacturer – all representing major European and EU member nations – Acciona of Spain, Ghella of Italy, Herrenknecht of Germany, and Norway – with its particular status (like Switzerland) of being subject to EU regulations without being part of it. Interestingly, however, the topic of the UK EU membership referendum was not mentioned once. Is the whole thing a storm in our British tea cup? Or are the other European nations more confident of the outcome as a status quo than is the UK?

The second point from a TunnelTalk perspective is that a member of our team is an EU member nation national from the Czech Republic, living and working here in the UK with her husband and family for many years. Both are professionals and contributing to the UK economy and without drawing at all on the UK welfare system. They appreciate the UK National Health Service but supplement this with private health insurance to cover themselves and their two young children, both born in the UK. For our team colleague this is a worrying time. The family wants to remain in the UK, which has become their family home and career base, but what would happen if the UK should vote to exit the EU? Neither adult is eligible to cast a vote in the referendum but applying for and gaining permanent residency status has become a top priority.

In addition to the direct experiences of TunnelTalk as part of the discussion, there is another to add. TunnelTalk is an international trade press magazine for the global tunnelling industry, and while its readers are in evenly distributed across the continents, its income from advertising is by far and disproportionately from European Union member nation companies. There is no doubt that the principal suppliers to the international tunnelling industry are EU based. The companies are readily identified in the industry, without being named, and are headquartered in Germany, France, Finland, Sweden, Belgium, The Netherlands, Italy etc.

For the UK, its once important status as a supplier and manufacturer of equipment for the tunnelling industry is long past. Companies that were major suppliers and manufacturers for the industry in the early 1980s are no longer in business and the UK economy has long since become service based rather than manufacturing based.

How this might change for the EU as manufacturing centres in China and elsewhere might rise in the coming decades is a different debate but for the moment the status of EU suppliers to the international tunnelling industry is indisputable.

The UK as a member of the EU benefits significantly from the tariff free import of EU supplies and services and would suffer the alternative should it decide to leave the EU on Thursday.

All these and many more issues contribute to the debate and the vote to be cast by eligible voters next week, and if you have strong opinions or comments, have your say and contribute to the debate through either our Feedback facility or via the online survey