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Construction could feel the No Deal squeeze

Places - Palace_of_Westminster

What would happen to the construction industry if the UK were to crash out of the EU straight away? Well, if the Operation Yellowhammer planning assumptions document is anything to go by, then the sector would suffer immediately.    

The slanted, photocopied document - released by the Government - provides the "worst case reasonable planning assumptions" in the event of a No Deal exit. However, The Sunday Times said it received this same document back in August, with one key difference: in the original text, the newspaper alleges these were base line rather than worst case scenarios.

Anyway, whatever way you dice it, it’s bad for those who have to trade with EU countries. The once confidential document starts by telling us what we already knew: that the relationship between the UK and EU is "unsympathetic" and that no bilateral trade deals have been concluded with any individual member states.

For construction companies relying on trade, the nightmare could begin after Halloween. Part of the problem lies in the preparation, but how do you ready yourself for an opponent whose size and shape are unknown to you? "Public and business readiness for a No Deal will remain at a low level, and will decrease to lower levels," the document states, "because the absence of a clear decision on the form of EU exit does not provide a concrete situation for third parties."

This is grim, but not as troubling as the projected delays at customs. On day one of No Deal, the Government says that "50-85% of heavy goods vehicles (HGVs) travelling via the short Channel Straits may not be ready for French customs" and that "HGVs could reduce the flow rate to 40-60% of current levels within one day as unready HGVs will fill the ports". It’s almost as if we can see the TV coverage in Kent already: lorries snaking for miles, makeshift mattresses, and anger - lots of anger.

For those relying on the steady flow of building materials from the continent, this could prove disastrous. For example, the Government has pledged its support for modular housing and off-site manufacturing methods. The problem is, the materials used to assemble many of these homes are grown in Europe.

In its response to a Government consultation on modern methods of construction earlier this year, the Mineral Products Association’s impassioned defence of traditional housing materials offers us a glimpse into this potential problem. "It should be noted that MMC/off-site products are typically imported from mainland Europe ready for site assembly, or fabricated in the UK using constituents and components that are mostly imported, especially timber, which is the primary construction material used," it said. "Timber grown in the UK is generally unsuitable for structural applications." So, we see that some sustainable housing manufacturers may be forced to operate from this uneasy footing.

Similarly, when the leaked document came to view in August, the Construction Products Association felt compelled to warn of the ills of No Deal. A smooth Brexit would help construction output to rise by £1.2bn by the end of 2020, it said, but a No Deal Brexit would lead to a £10.5bn fall in the same time frame.    

It is clear that trade could buckle under the weight of a No Deal Brexit, but that is not the only storm crow cawing above us. The document mentions protests, community tensions, strained resources, and rising fuel prices. Even if you were to dismiss the less tangible effects of this disruption, the rising price of petrol would be a blow to the construction industry, which relies on the mass movement of vehicles and machinery.

The Government release concedes that there would be rising fuel prices if a No Deal came to pass. For small and medium builders with slim profit margins, these higher fuel prices and trade issues could see pulses fade into stillness.          

Brian Berry, chief executive of the Federation of Master Builders, put it all into perspective recently: "More than half of small construction companies believe that leaving the EU without a deal would cause material prices to sky-rocket, and just under a third believe it would lead to lower workloads," he said.

"Construction is like a mirror for the wider economy, as it’s highly sensitive to market confidence. What we’re looking at currently is highly concerning. The Government must negotiate a deal that Parliament can pass in order to avoid a recession."

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