How Brexit has impacted the London construction industry
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Brexit has caused a seismic shift in the London construction scene since the UK voted to leave the European Union in 2016. As one of the largest sectors in the city, the construction industry has been significantly impacted due to its heavy reliance on the free movement of labour, goods, and services across EU borders. The consequences of Brexit for the London construction scene are wide-ranging, and some of the key areas that have been affected are:
Skilled labour shortage: Before Brexit, the construction industry in London depended on migrant workers, with around 30% of the workforce being made up of EU nationals. However, since the Brexit vote, many EU workers have left the UK due to uncertainty about their future status, leading to a shortage of skilled labour. This has resulted in a skills gap for construction companies in finding the necessary skills to complete projects. According to a survey conducted by the Royal Institution of Chartered Surveyors (RICS), nearly 60% of construction firms reported a shortage of skilled workers in the aftermath of Brexit. The same survey found that 35% of EU workers in the construction industry were considering leaving the UK as a result of Brexit.
Increased construction costs: The cost of construction materials has risen since Brexit, which has negatively impacted the profit margins of construction companies. With the introduction of tariffs and customs duties, construction firms are forced to pay more for materials that were mainly imported from the EU. The rise in construction costs makes it challenging for construction firms to complete projects within budget, thereby reducing their profitability.
Delays in construction projects: The Brexit uncertainty has led to delays in the approval of construction projects, with many developers adopting a wait-and-see approach. This has resulted in the slowdown of the construction industry, with fewer projects starting and reduced demand for construction workers.
Shift in investment focus: The uncertainty of Brexit has caused a shift in investment focus from London to other European cities such as Paris and Frankfurt. This has resulted in a reduction in the amount of investment in London construction projects, which has negatively impacted the construction industry in the city. According to data from CBRE, investment in London's commercial property market fell by 35% in 2018 compared to the previous year, mainly due to Brexit uncertainty. In contrast, investment in Paris and Frankfurt increased by 15% and 28% respectively.
The impact of Brexit on the London construction scene has been substantial, with a shortage of skilled labour, increased construction costs, delays in project approval, and a shift in investment focus. Construction firms in London will need to find ways to adapt to these challenges and ensure that they remain competitive in a changing global market.