Political upheaval and Brexit 14 Mar 2019

Leaving with a deal; leaving without a deal; leaving on 29 March with or without a deal – it all still hangs in the balance. With this political uncertainty, which started more than two years ago when UK voters voted in a referendum to leave the European Union in June 2016, the preparedness for the situation - one way or the other – seems equally divided.

There are those who feel that the perceived impact of the UK separating from its, currently, open boarders with its 27 neighbours of the European Union (EU) will be much less severe than predicted. Yes there will be a period of disruption, they say, while the paperwork and the new situation becomes the norm. But the EU and the UK are now inextricably linked economically if not politically. The EU exports more goods and services to the UK than vice versa and the idea that the EU would impose tariffs on goods to the UK would begin a tit-for-tat trade war that would be of no good to either side – much like President Trump in the USA who has instigated a trade war with the giant global trading partner China, they add.

The opinion seems to be that – short of a reversal of the 2016 referendum and the UK stays in the EU and the status quo for free movement of goods and people across open boards within the Union continues – business, in the end, will bring the pragmatic resolution to proceedings where politicians on both sides of the Channel are unable to arrive at an orderly departure of Britain from the EU with a deal, and crashing out without a deal is not high on anyone's agenda.

But how prepared is business to take up that mantel?

More than 60% of construction materials in the UK are reported as being sourced from the EU

Goods and services

Reports are that up to 60% of construction materials for UK projects are sourced from the EU (Fig 1). As a result, major UK businesses, relying on just-in-time delivery of vital materials from EU suppliers, are stockpiling in readiness of supply-chain delays while others are only now addressing the real ramifications of a UK outside the EU as a reality.

With the UK outside the EU – particularly without a deal – the UK becomes a foreign importing country, just as with imports from all other non-EU countries such as China, USA, Australia, India, Canada and so on. In that case, all UK companies will require an EORI number – a Economic Operator Registration and Identification number - and engage an import agent to deal with import customs paperwork and pay the duties imposed. According to the UK Government website, it takes 5 to 10 minutes to apply for an EORI number and it could take up to three working days if checks are needed.

Further warnings are that:

• shipments will be no longer possible for companies that are not registered in the UK and are unable to apply for an EORI number;
• shipments need to be prelodged at customs and the customer’s customs agent will have to presubmit paperwork to British customs before arrival of the goods into the UK;
• companies will have to ensure that invoices are sent to customers immediately once goods are loaded, with documents sent directly to their agent for attention;
• a Safety and Security Declaration (ENS) has to be submitted by the carrier before arrival of the goods into the UK.
• companies sending goods into the UK provide the carrier with a copy of all documents required for presentation at customs.

The fear is that this major change to the free movement of goods across EU borders will cause chaos and major delays and border customs checks as the new reality is imposed and grappled with even for those who are well prepared as they suffer the consequences of those who are unprepared.

Another warning is that European road hauliers are increasing rates for transports to the UK as Brexit approaches and their services are being booked up well ahead of time. The notice to customers in the UK is to allow up to four weeks and more on due delivery lead times.

Employees and workers

Another major consideration is for UK contractors and companies who have EU employees, working in the UK under the free movement of people within the EU. Large manufacturing industries in the UK have reported a significant move of EU employees and workers leaving the UK to return to their home countries or seeking employment in other EU countries, in light of the uncertainty about the political situation and either EU status. EU countries are celebrating what they have called a reverse brain-drain, with skilled workers returning to boost the economies in their home countries.

The 2017 National Infrastructure and Construction Pipeline for the UK predicts about £600 billion of public and private infrastructure investment over the coming 10 year period to meet growing infrastructure demand and to upgrade existing infrastructure.

The UK relies on up to 70% of its labour force from foreign and EU countries

In a report prepared by the Construction Products Association, it estimated that about 30% of the UK-born construction workforce are aged over 50 years old. It also finds that 11% of the UK construction workforce are non-UK nationals with reliance on foreign workers London being much higher and as high as 45% from abroad. In some areas and some sectors of the construction industry it suggests that foreign and EU workers is as high as 60-70% (Figs 2).

The free movement of people from EU countries was a major concern for the majority who voted in the UK referendum to leave the EU. But the high reliance on EU employees and workers was rarely part of the debate. A change in UK immigration laws, following a departure of the UK from the EU, to impose working visas or stringent immigration laws on EU nationals living and working in the UK will impact this reality significantly. The lack of skilled employees and workers in the UK to replace the reliance on foreign and EU nationals has been a concern particularly among UK education and training institutions and organisations.

For companies and contractors working in the UK, the comment was ambivalent. The industry will operate as per normal was one comment by a UK engineer who admitted to voting out in the referendum. “We will still be able to engage and allow immigration of professionals from Europe, as we will have to meet the needs in capacity and expertise and provide for construction and supply competition.”

A professional construction engineer from Germany working in the UK said: “I cannot see a situation any time soon when the internationals working in the UK will be restricted entry and if it does occur, we are used to the processes for preparing the legal paper work for staffing projects in other parts of the world where visas are required. We have a department in the company dedicated to managing those processes and so the UK would become another country within the list where special attention is required.”

There can be no doubt however that the predicted changes in immigration laws would have an immediate impact on the UK construction industry. EU construction companies working on projects in the UK will spend time and money making the employment status adjustments and such adjustments will factor into EU companies bidding for projects in the UK in the future.

A final consideration for a departure of the UK from the EU is the disruption or severing of the current links with laboratories and research and development institutions in Europe. With a lack of such facilities in the UK there is a reliance on these European organisations to fulfill the testing and development of materials which, it is predicted, could become less efficient and easily available as it is currently.

With the UK set to leave the EU in less than 15 days, on the 29 March, there is a great deal of uncertainty still and much to consider and prepare for in the event especially of a no-deal exit.