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  • Overview

    Whilst statistics released last week suggest sluggish performance in the sector over the latest quarter, the extent to which this and future trends can truly be attributed to Brexit remains a complex issue for the medium term. The nature of the sector’s operation is such that it will, in large part, probably be most affected by the ebbs and flows of the wider UK economy.

    Changes in the exchange rate should have less direct impact on the construction sector than other parts of the economy – UK contractors are predominantly domestically focused, and figures show that the majority of materials used are still produced within the UK (with overseas supplies still generally used to meet peak demand). There will though be greater implications for consultants, who have a greater proportion of overseas work.

    The wider economic outlook introduces the greatest note of uncertainty, or opportunity. Looking back, it is interesting to see that a January 2016 survey by Smith & Williamson found that as much as 85% of construction and real estate companies backed continued membership of the EU, and it will be interesting to see how much that affects confidence during the transitional periods. Since the referendum the construction sector has seen modest growth, although there are inevitably a spectrum of views as to whether that growth would have been greater had the status quo been retained. It will only be in time, and following the completion of the UK’s exit, that the true picture can be ascertained.  The extent to which inward investment, particularly into London, is affected remains a key issue.

    For the sector, big question marks of course remain as to what restrictions may be placed on the movement of labour – important across the sector, including given the ongoing (and non Brexit related) skills shortages affecting both the contractor and consultant sides of the sector.

    Actual changes to the law, under the “Great Repeal Bill”, are probably going to be quite modest for the sector in practical day to day terms. Much of the regulatory law emanating form the EU has already been enshrined in English law in relation to health and safety, environmental law, etc, and it is perhaps unlikely that there will be much of an appetite for sweeping wholesale changes, given the practical implications of bedding in new working practices.

    Legal issues, on the other hand, will almost certainly react and develop, to enable people to remain optimistic, whilst retaining flexibility, particularly for longer term projects. Market trends will become increasingly clear, but expect more attempts at “get out” clauses and fluctuation mechanisms, whilst the markets and pound remain destabilised. And where problems arise, the trend to smarter dispute resolution seen since the recession is also likely to continue, so whilst parties may be more contractual when times are less buoyant, the proactive use of modern dispute resolution techniques will remain essential.

    If you would like to further dicuss any of the information detailed above, please contact Senior Associate, Chris Kirby-Turner, from our Construction & Engineering department on 01322 623705 or at chris.kirby-turner@ts-p.co.uk.

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