Webinar: Core Futures: The impact of Brexit on procurement

30 September 2020. Features.

On Thursday 24 September 2020, our head of landlord Kevin Wither featured on Core Five’s webinar series Core Futures alongside guest speakers Glenn Cook Design Manager representing BAM and hosted by Abigail Hughes, Sam Andrews and Ciara Walker of Core Five.

Hosted in a one-hour webinar, the subject covered a range of topics from labour, materials, exchange rates and what opportunities and issues Brexit may bring to the UK construction industry.

Labour

Since the Brexit vote in June 2016, the flow of European trades into the UK construction industry has started to see some tightening, with lots of site trades having been placed onto the tier two construction list to come to the UK to carry out certain skilled work including electricians and specific site trades such as crane operators.

There is a strong push to develop the domestic labour force, which could see pain in labour costs, and in the long term means the UK needs to resolve a skills shortage that has been in existence for quite some time.

Covid-19

It would be impossible to not mention the impacts of Covid-19 on any industry right now, and the question is: will the combination of Covid-19 and Brexit collide and create issues for projects?

Kev wither explained “We could have a potential scenario where it impacts the quantity of projects. We have witnessed Covid-19 impact many pipelines and this in turn could suppress demand in the commercial office sector, however works being won now and programmes being pushed into next year - the demand hasn’t been as negatively impacted as it could have been”.

“However, we still have the cost implications of Brexit to come, and labour and material shortages which may challenge margins. One of the big impacts has been cash flow issues; there is a possibility we may see some failures in the supply chain with further shortages leaving no alternative other than finding other suppliers to carry out the work”.

“Specifically, at Peldon Rose, our project list isn't always on the scale of general contractors like BAM. As fast fit design and build specialists, and as lease breaks occur people have knuckled down and delayed work”.

“We are starting to see a resurgence and starting to see confidence build in the market, and as such, not observing a massive Brexit impact on our type of client. Long-term we are not seeing direct impact, but like all others, we need to understand where Brexit will take us and how it could further impact the industry”.

Materials

The panellists stated specific materials such as unitized glazing and bespoke stone from countries in Europe are becoming a challenge to order. Plus, prefabricated items that pass borders multiple times and deal with multi-stages of importation, which complicates and lengthens the process and means paying multiple tariffs are where we are foreseeing a challenge.

Some shortages that were happening because of Covid-19 could also impact Brexit, however this has been more domestic, so the two do not seem to be overlapping - yet.

How are contractors mitigating border delays on programme?

Kev Wither explained “In the design and build world, procurement route and approach are different to general contractors. Our in-house design team implement practices to ensure that we are driving the programme, we try to understand the risks at a very early planning stage, meaning we can flag any programme risks with international suppliers, and adding value by offering an alternative specification by utilisng a UK supply chain”.

“Currently our focus remains on specifying local or regionally sourced materials. It’s about understanding how much we have managed to procure locally in the two years since the original vote, and can we grow the market and secure availability?”

“If a client is EU based, sometimes their space needs to align with their wider real estate and certain products can only be provided be an EU supplier, which we will always accommodate, but we can drive the dialogue and add value from the early stage”.

Are there any materials we are expecting to see be stockpiled?

All guest speakers agreed that we are starting to witness stock piling of more common items such as plasterboard. Construction economist Ciara Walker explained “It isn’t clear on cost implications, but we are close to max space on stockpiling, due to Covid-19, not Brexit. People in logistics saying if we see stockpiling up to past no deals, we will run out of space - makes stock piling itself expensive - seeing delays factored into a project programme”.

Glenn Cook explained that Covid-19 has helped in terms of Brexit and has actually enabled an additional production line to open to get a critical project over the line.

Has Covid-19 helped construction prepare for Brexit in the materials arena?

Kev quoted a specific example from the Peldon Rose furniture team “UK manufacturers have seen an uplift in people producing the materials locally, specifically on furniture, there is slight reluctance in investment into research and development, for example a task chair is not fully produced in the UK. The chair will be created here but a component such as the gas lift is required from Europe and this minimises the risk by not investing R&D but understand they need to get them now – we have seen that in other areas too - such as lift components”.

How do you see Brexit putting pressure on industries, such as financial and commercial office?

Kev wither shared his thoughts “There are schemes coming through – the residential sector is buoyant. Regarding the commercial office sector, a few years ago people opinions would be different. There was a lot of reluctance from the EU for UK redevelopment, whereas now people are saying they don’t know if they would survive without a UK based premises. Businesses have realised that the initial Brexit stance has been driven to change by the process, seen the ups and downs for productivity and that they do need the UK space in what is a very powerful market”.

Ciara Walker had a more pessimistic view however “Looking at recruitment patterns for international companies London based, universally they have stopped recruitment and put more incentives into Europe. I believe there will still be offices, but they are not going grow their space because we are a smaller market than the EU. Logistics is increasingly optimistic - demand is full - never seen the levels of demand and the increase in ecommerce. And I don’t believe residential in London will ever be threatened - seen as a safe haven for property to be guaranteed and won’t change, along with places like New York and Singapore”.

“The money will go into big projects, just which ones, supply chains will have to adapt to a new way of working, new industries will be created 10 years down the line that we don’t even know about yet...”

What are the opportunities that will come from Brexit?

Kev Wither: “The biggest potential is growth of the local manufacturing sector, as a deign led business it means local becomes something we back and invest in.”

Glenn Cook: “Opportunities for domestic industries to grow and increase their presence, and local labour to get into a rewarding industry”.

Sam Andrews “A opportunity for designers to start specifying early on what can be provided by the UK - lots of opportunity here marrying up the specification with reality”.

Ciara Walker: “Logistics and development of ports, lots of energy and infrastructure will go into these sectors and developing people and improving people’s lives”.

Watch the webinar

You can watch the recording in full here.

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