A Further Industry View of Brexit by Simon Flint

Brian Connell, KPMG, spoke to the Leaders Breakfast Meeting (LBM) on 7 May 2019. An event that was hosted by KPMG.

After a brief pause in the political debate, we look to brace ourselves for the European elections on 23 May 19 which, in many people’s eyes, we should not be having. Into this void, Nigel Farage has re-entered with some gusto judging by his performance on the Andrew Marr show. Are we in for another shock anti-establishment vote? In recent years populist votes have seen the Referendum, USA, Greece and Ukraine upset the traditional patterns. There is a growing populist movement across Europe with nationalist overtones.

The dissatisfaction of the UK is reflected in the opinion polls. The Brexit Party leads with 34% going into the European elections. With a charged Leave wing of the Conservative party, could a new political coalition be brokered for a snap General Election? With the Remain/Soft Brexit faction lacking a credible leader to rekindle the passions, the political debate is being dominated by those who are not shy of a “No Deal” scenario.

Construction would be reasonably comfortable with any one of Brian Connell’s three scenarios:

  1. Theresa May’s withdrawal agreement is passed with some minor adjustments. The country proceeds through Transition (which is getting shorter because the end date is currently fixed). Theresa May is replaced by a “Leave” Prime Minister. ERG and DUP are back on board and give full support to an orderly withdrawal.
  2. Conservative and Labour parties can not agree a deal. Labour party has no incentive to agree and its main objective is to force a General Election on the most favourable grounds. EU gives the space to UK and provides an extension to end of October.
  3. Theresa May is ousted and Conservative Leave PM leads Parliament through a series of indicative votes – probably with a greater emphasis on a harder Brexit.

Brian ruled out a “No Deal” scenario as Parliament has already voted in principle against this eventuality. However, with the Farage bandwagon looking as though it may gain momentum, a WTO arrangement is a possibility. He argues that like moving house, there remains a short term pain but the long term benefits are for all to realise. With no manifesto (another line of lies in his opinion) there is little opportunity to identify the possible outcome for construction in his vision.

For construction then the paralysis in key investment decision making persists – probably for the rest of the year. Is the industry then static, constrained by its tight margins or is it making its own contingency plans? Unwittingly it appears to be taking Andrew Wolstenholme’s advice to “never waste a good crisis”. The issues of skills, diversity, productivity, safety and carbon reduction are still apparent and Brexit is helping to concentrate the mind.

Balfour Beatty and others are increasing their offsite manufacturing techniques thereby improving quality and safety whilst reducing the need for unskilled labour.  Project 13 has identified that using a digital platform 35% of costs can be removed. By effectively flattening the supply chain the transactional costs can be consolidated. Consultants are recruiting more in Europe for local offices. Engineering in Europe has greater appeal to women in Europe and there is a larger pool to draw on. Skanska is driving a reduced carbon agenda. Using its experience from the @oneAlliance with Anglia Water, it is reducing costs by reducing carbon.

These developments are well trailed and it adds weight to the view that the industry is ingenious. What the industry needs though is leadership from its political leaders and from its industry to provide focus and therefore a forward momentum. The danger is that we are all deflected from the overall objective and instead of a choosing a better value option, we as a nation select a low cost substitute…from the East.

 

Simon Flint, the author, is chairman of the Leaders Breakfast Meetings which seek to discuss topical construction issues. He has worked with Constructing Excellence and its predecessors since the 90s – looking at pioneering initiatives that improve the efficiency and productivity of the industry. However, the thoughts expressed in this “article” are personal and do not necessarily reflect those of Constructing Excellence or Advance Consultancy. 

The Leaders Breakfast series are a collaboration between Constructing Excellence and Advance Consultancy.

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