The Trade and Cooperation Agreement (TCA), which came into force on 1 January 2021, is the product of months of negotiations between the EU and the UK to secure a post-Brexit deal. The TCA is the free trade agreement which governs the relationship between the EU and the UK, and governs for the trade of goods, services, movement of persons and so on.
The TCA has introduced many changes which have impacted the construction industry. Coupled with a skills shortage and the ongoing impact of the COVID-19 pandemic, the construction industry is undergoing a challenging period of disruption and change.
This article will outline the main changes which the TCA brings, the impacts which they may have on the construction industry, and make some observations about the current state of the industry post-Brexit.
The free movement of workers is one of the most important parts of the TCA, and is critically important to the construction industry, given 10% of all construction workers in the UK are EU nationals.
The TCA has introduced a points based application system which anyone wishing to work in the UK will be subject to. The points based system was designed to attract workers with certain skills, such as architects or engineers, but is likely to exclude those with general labour skills. The system requires the applicant to produce evidence of their job offer and their minimum salary, which is problematic given that many construction workers will not meet this minimum salary criteria. As a result of this, project costs may be driven up as a result of higher demand for labour. Indeed, there is already widespread evidence of a skills shortage, as the exodus of non UK EU nationals has exposed the lack of indigenous skills such as bricklayers and joiners. This has been compounded by an aging workforce and the failure to attract UK nationals to these jobs.
Products and Materials
When the UK voted to leave the EU, this marked the beginning of the end of the free movement of goods. For the UK, a country which imports more materials than it exports, this is a significant issue. The TCA introduced a range of measures which had the aim of ensuring a steady flow of materials between the UK and the EU post-Brexit. Despite these efforts, however, factors such as customs checks and restrictions on certain products which originate out with the EU, have hindered construction projects and slowed down the movement of these goods.
As a result of this, those managing projects need to be more flexible with their timescales, to take into account potential delays in receiving materials and develop contingency plans to tackle product shortages and the cost implications associated with this.
The rising costs of construction raw materials such as concrete, steel and timber, have been widely reported recently. It would be wrong to assume that these rising costs have been caused purely by Brexit. In fact, the Brexit effect is likely to be quite minimal, albeit post-Brexit customs checks is a contributing factor. The Covid pandemic has driven a substantial increase in domestic construction projects, so the basic rules of supply and demand have driven up prices. This has been compounded by timber shortages in the Scandinavia, and aggregate shortages in the USA – in both cases global warming is likely to have had an effect.
Product marking is a significant consideration for the construction industry, as this is the system which regulates products to ensure that they are safe and can be sold on the market. Pre-Brexit, product marking was controlled by EU-regulations and was indicated by a CE marking. From 1 January 2022, however, CE marks will no longer be allowed and UK construction firms will have to begin using the United Kingdom Conformity Assessed (“UKCA”) marking.
At the moment, EU products which already have a CE marking can still be placed on the UK market without the need for separate testing by the UK. This aims to mitigate any disruption to the accessibility of products from EU countries. However, this option will only be available for a certain period of time and thereafter it is likely that all materials which are used in the UK will require to have a UK mark. The UK Government has not advised when this period of time will end, but business have been assured that they will be given prior notice to prepare. In particular, businesses will have to consider how these product marking changes will impact their business and the materials which it uses.
This article has highlighted some of the apparent implications which the TCA and Brexit has already had on the construction industry. Whilst the long term picture remains unknown, what is certain is that the UK construction industry must prepare and adapt in response to the apparent, and not yet apparent, challenges ahead.
If you would like further advice on the impact of brexit on the construction industry, please get in touch.