You are here

UK builders see Brexit crisis when foreign labour disappears

[LONDON] Monika Slowikowska is incredulous when people tell her foreigners will still want to come to the UK after the country leaves the European Union.

As a Pole who owns a London construction company, Ms Slowikowska is less sanguine. She fears for an industry facing a Brexit immigration clampdown, including high salary requirements for visas and restrictions on low-skilled labour.

"We believe that we're still a paradise destination," said Ms Slowikowska, who has lived in the UK for 20 years and employs nearly 200 workers. But that's "just unrealistic" when workers can choose other countries such as Germany, Norway and Italy, she said.

High living costs and a falling pound are further deterrents for EU citizens considering settling in Britain. With Prime Minister Boris Johnson vowing to get out of the EU on Oct. 31, "do or die," the pound is at its lowest levels since shortly after the 2016 referendum -- eroding the value of money earned in the UK when remitted overseas.

sentifi.com

Market voices on:

The construction industry, which accounts for 6 per cent of the economy and employs a similar number of people as manufacturing, has a lot to do to prepare for the Brexit deadline. With the government setting ambitious home-building targets, the sector faces an acute labor shortage after struggling to recruit workers for a decade.

Under plans set out in December, post-Brexit rules will require EU workers to be divided according to their qualifications. "High-skilled workers" would be those with a secondary-school degree or higher. Only those who earn at least 30,000 pounds (S$51,000) would be allowed to work and stay in the country.

For foreign workers without these qualifications, there would be a one-year limit to living and working in the UK, before they would have to leave again for another 12 months. Almost half of builders are non-UK nationals.

A failure to attract young people means the industry is reaching retirement age unusually quickly: just 10 per cent are under 25.

That means a labor shortage in the near future: The Construction Industry Training Board estimates that the sector will need to recruit and train 31,600 workers every year for the next three years just to keep up with demand. The number of apprentices going into construction fall short of this figure by almost a third.

The construction industry has been grappling with how to deal with a shrinking workforce. Ian Calvert Sutcliffe, chief executive officer at Countryside Properties Plc, says the company is mindful of the "shortage of skilled labour on site" when thinking about expanding.

Ms Slowikowska, who served on a panel of advisers for new immigration rules, estimates that 90 per cent of her employees are from the EU. She considered the Leave result in the referendum "the end of my business -- that when Brexit happened it would probably be so difficult to get the labour force that the business would have to close down."

Construction businesses in London are particularly reliant on non-British workers. The other 27 EU nations alone represent 28 per cent of construction workers.

Ms Slowikowska has already started to turn down projects. "We're basically rejecting our customers. We have 28 million pounds of contracts on site now -- if we had no labor restrictions, we would easily be able to get 53 million pounds."

Businesses like hers have been disappearing for a decade. Real-estate agent Savills says there are 72 per cent fewer smaller house-builders registered than in 2007. Aside from making it more difficult and expensive to add extensions to existing homes, the government says that roughly 250,000 homes a year need to be built through the middle of the next decade to meet demand.

Rico Wojtulewicz, the senior policy adviser for the National Federation of Builders, has been campaigning vigorously for the government to make concessions, such as special visas for construction workers.

"Construction is everything -- you need it for schools, hospitals, infrastructure," he said. "It's actually very difficult to finish these projects without access to labor and any way of replacing them."

Points System

During his campaign to lead the Conservative Party this year, Mr Johnson suggested introducing a points-based system similar to Australia, where potential migrants are assessed by factors such as their skills and the assets they own.

"A points-based system is not very different to what's currently proposed in the paper," says Gabriella Alberti, a professor in work and employment relations at Leeds University. "The logic is very much the same; you only enter if you pass a certain level of tests."

For Ms Slowikowska, all of the options are frightening. Asked what the best-case scenario for her business is, she simply says "Survival."

BLOOMBERG