[ Focus: Brexit special ]
Sector shows pragmatic early response to Brexit ECA CEO Steve Bratt reflects on the 2016 engineering services sector-wide survey on the implications of Brexit, and takes a look ahead…
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vchal/ shutterstock
etween 11 August and 5 September this year, some 700 respondents from across building engineering services replied to the sector’s first ever ‘Brexit’ survey, in conjunction with the BESA and SELECT. The response was a strong indicator of member interest in Brexit (two-thirds of the respondents were ECA members). While subsequent events suggest that Brexit will be a roller coaster ride for the UK, the early response from members suggests that the sector is unfazed by the prospect of the UK leaving the European Union. Almost half of respondents to the survey (46 per
cent) believe Brexit will have a positive impact on their company in just five years’ time, with less than one in five (19 per cent) saying the effect will be negative and under one-quarter (23 per cent) saying it will have no apparent impact. While the largest contractors (over £20m turnover) were generally less inclined than smaller companies to believe Brexit would help their business (29 per cent of the largest companies said it would have a negative impact), their response was not negative overall. Looking forward to 10 years’ from now, respondents to the survey were even more optimistic. Just over half (51 per cent) said that the overall effect of Brexit will be positive – while just 10 per cent believed it will be negative. Interestingly, only 1 in 4 respondents overall (25 per cent) said Brexit will contribute to skills shortages, though 40 per cent of the largest contractors believe it will. The responses (see Chart 2 below) also showed that many members are looking forward to the possibility of UK-driven changes to employment law (the majority did not believe that Brexit will deliver significant changes in technical, health and safety or environmental policy or legislation), although it should be noted that the UK Government has already stated that it will not be looking to reduce workers rights. As for areas of concern, nearly half of respondents (47 per cent) said they expected the cost of materials to increase (and at the time of writing, and since the value of sterling has dropped significantly, there is evidence that this is happening). Additionally, a further 35 per cent said they believe Brexit will delay government construction projects. Significantly, respondents identified the government’s top negotiating priorities as full access to the EU’s single market (currently a large bone of contention in government and elsewhere with a ‘hard’ Brexit gaining favour) and flexibility to negotiate trade deals with non-EU countries. The freedom of movement for workers was not a top priority for most respondents, which strongly suggests that engineering services contractors mainly rely on UK workers.
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[ Focus: Brexit special ]
[ Focus: Brexit special ]
In 10 years’ time n Positive n No change n Negative n Don’t know
In five years’ time
0%
20%
40%
60%
80%
100%
Chart 1 – What will be the overall impact of Brexit on your company?
So what do we know?
As we head towards Brexit, certainty is a rare commodity. So what do we actually know in November 2016? Five points come to mind: n The government want to trigger Article 50 of the Lisbon Treaty before April 2017, but now need to contend with the recent High Court ruling requiring a vote by parliament; the reactions of the devolved assemblies and the contention that we have the right to remain within the European Economic Area (EEA) n Article 50’s set two-year process will seek agreement on how the UK will leave the EU (which is not the same as having any fully negotiated future relationship) n (Other) European leaders continue to say that free access to the EU single market cannot be agreed without free movement of EU citizens n We should expect a ‘Great Repeal Bill’ next year, which will allow the UK to revoke the European Communities Act and transpose 40 years of EU law into UK legislation, once we leave n Business will begin to flex its muscles to influence developments, particularly around the concept of a ‘hard’ Brexit, as we are already seeing with the banking sector talking about relocations In principle, the proposed Great Repeal Bill would allow the UK to keep, amend or revoke an array of EU legislation – provided a negotiated relationship with the EU allows it, and that changing parts of regulations can be done successfully. However, there needs to be effective scrutiny of proposed changes to the law, so that good regulation is not thrown out with the bad. We also know that much of the legislation we want to see changed stems from the UK’s interpretation and implementation of EU law and a tendency for ‘gold plating’. We will therefore seek to ensure that this opportunity for a considered and constructive review is not missed. Following the Autumn Statement the UK’s growth forecasts have been reduced but there is still recognition of underlying strength. Investment in infrastructure will be key to maintaining the buoyancy of the construction sector. Things remain fragile, particularly in terms of longer term investment in
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ECA Today Winter 2016
commercial property, however the current signs indicate that the uncertainty of the build up to the Referendum and the immediate shock of the Brexit vote have not been as negative as forecast and optimism has returned, at least for the short term. What happens next is not just confined to the UK. Key EU member states have their own issues which will affect the negotiations – eg next year’s French and German elections and an important Italian referendum on 4 December 2016. At a technical level we recognise that many of the standards and product requirements impacting us are international in nature and will continue to be developed within the EU. The ECA will remain involved with the various European technical bodies developing these standards to ensure that our members’ views are considered. We will also be monitoring the potentially significant impact of the surprising US presidential election.
Opportunities and challenges
We will be listening closely to our members as the process moves forward
It was vital that we understood the early views of our members on Brexit, and we will be listening closely to our members as the process moves forward. Yet, no matter how our relationship with Europe (and the US) develops, the big issues currently facing our sector - such as payment and skills - still need our urgent attention. There is already some concern that important issues will be delayed due to government resources being prioritised to deal with Brexit. We therefore need to make sure that government doesn’t lose focus on dealing with these issues now. Our sector provides thousands of skilled jobs, enables highly functional buildings and infrastructure, and contributes to UK energy capacity and security. As the UK negotiates its exit from the EU, perhaps more than ever, it will need to rely on a vibrant engineering services sector, and we will need to have a strong voice to shape our future.
What effect will Brexit have on our sector in the next five years on the following? Technical standards
Positive Negative No change
Health and safety
Employment
Environment
Skills
36% 9% 46%
43% 11% 35%
35% 12% 42%
37% 11% 41%
34% 13% 41%
What do you believe will be the overall impact of Brexit on your company in five years’ time? (by annual turnover)
Up to £200k
£200k£20m
Environmental policy and legislation Employment policy and legislation
n Positive n No change n Negative n Don’t know
Health and safety policy and legislation
Over £20m
10 years
5
years
Positive Negative No change
46% 14% 27%
46% 21% 22%
Brexit will worsen the shortage of qualified operatives and professionals Disagree Don’t know
Skills policy and legislation
What do you believe will be the overall impact of Brexit on your company in five and 10 years’ time?
18%
57%
42% 29% 11%
In five years’ time
In 10 years’ time
18% 27% 23% 14% 6%
29% 21% 24% 6% 4%
Very positive Slightly positive No change Slightly negative Very negative
What should the government prioritise in the Brexit negotiations with the EU?
Top priority
Top priority
Top priority
Single market access
Control of employment law
Non-EU trade
#1
#2
#3
Technical (e.g. electrical, fire) standards 0%
20%
40%
60%
80% 100%
Chart 2 – What effect will Brexit have on our sector in the next five years on...?
Agree
25% Winter 2016 ECA Today
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