Brexit and the public sector built environment

The event was hosted by Women Who Build Britain and whilst it is clearly difficult to predict the precise impact Brexit could have, there are a number of visible issues for both the public sector and the construction industry.

In the run up to the referendum, there is already a great deal of uncertainty about the future of the economy, and major construction projects are being acutely affected. Key decisions are being put on hold until after the vote. Should the UK vote for a Brexit, this situation could continue until a renegotiation of Britain’s relationship with Europe has been completed.

This makes it extremely difficult for Local Authorities to plan essential provisions such as school places, or for NHS Trusts to shape their primary care facilities – this is no easy task and relies upon detailed population, movement and demographic projections in each region.

Our recent school places research found that as many as 11,000 new primary school classrooms are needed by 2024 to meet the rising number of primary school pupils, and many local authorities are already working on building these. Any significant drop in EU migration could mean these classrooms become underutilised, and so it is understandable that public sector decision-makers might choose to postpone commissioning them.

A critical issue that must be addressed in the event of an exit vote is the likelihood of reduced investment in both public and private sector construction projects, as EU funding falls away and foreign investors target opportunities for better prospects of returns elsewhere.

The loss of EU funding for major projects would be an absolute travesty that would put some of the largest schemes under threat with no alternative source of funding in sight. Projects that could be threatened include the extension of the M8 motorway between Edinburgh and Glasgow, and investment in 65 new Super Express Trains for the East Coast mainline.

Construction output is already stalling as a result of the uncertainty caused by the referendum. The most recent CIPS/Markit data showed that activity in the construction industry in May slowed to its weakest level of growth since June 2013. Even when output picks up again, the delays of the last few months will have a knock-on impact on projects and could mean the slowdown being felt years down the line due to a chain of decisions being put on hold. In the event of a Brexit vote, the issue could remain hanging over the industry for several more years as the renegotiation gets underway.

Currently foreign workers make up around 12% of the construction workforce and most of these are from the EU. To meet demand and replace retiring workers, the UK needs to recruit nearly 1 million new workers into the construction industry by 2020, a nearly impossible task if we leave the EU.

From a procurement perspective, Brexit may have less of a short term impact. We expect there will be little change to the use of all forms of frameworks, even if the UK leaves the current EU regulatory system the procurement principles are enshrined in UK legislation.

Frameworks are proven to deliver efficiencies and value for the UK taxpayer so there is likely to be ongoing demand from across the range of public sector organisations as their drive for improved quality in service provision, more innovation and better outcomes continue to be challenged by inadequate resources. SCAPE’s frameworks alone have saved over £390m on public sector projects and as such, we expect current and future frameworks will remain attractive, on offer and in demand regardless of the result on the 23^rd June.