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What will Brexit mean for the UK's construction sector?

Alex Delin
18/02/2020
In this post, we summarise some of the key questions around Brexit now the UK has officially left the EU. Predicting how Brexit will affect the UK construction industry remains fraught with challenges, not least because, for the time being, existing EU rules continue to apply.
 
Now that the UK has left the EU, it has entered a transition period, which runs until 31 December 2020.
 
As things stand, the UK government maintains this will not be extended, following the enactment of the European Union (Withdrawal Agreement) Act 2020.
 
Brexit's impact on construction, as for the country as a whole, will be shaped by negotiations between Member States and the UK, with the political declaration featuring as the starting point for discussions.
 
TCC
 
As well as obvious questions about Procurement Law (where revised sterling thresholds apply from the start of this year) and concerns about labour shortages and material price fluctuations (see below), an issue to be particularly aware of is the effect Brexit may have on parties that use the Technology and Construction Court (TCC) to resolve disputes.
 
This is particularly pertinent to those sourcing materials from EU-based suppliers.
 
CPR6.33 enables parties to serve proceedings out of the UK on those domiciled in countries that have signed up to the Lugano Convention, which recognises civil judgments between Member States and makes judgments easier to enforce.
 
As the UK has not ratified the Lugano Convention itself (it was bound by being a member of the EU), it is expected that the UK will formally join the Lugano Convention to avoid becoming judicially isolated.
 
European payment orders
 
There is also the impact of Brexit on the European Payment Order system, which is the simplified procedure for cross-border claims that are uncontested by a defendant.
 
European Payment Orders are automatically enforceable across the EU in uncontested matters, relieving the pressure on cash-flow.
 
Depending on the framework agreed between the UK and EU, it may eventually become the norm for judgments to be awarded, followed by application of a defendant's local law on enforcement in the absence of cross-border recognition.
 
Labour and materials shortages
 
A large proportion of the UK’s construction workforce and building materials are sourced from the EU, which could leave yawning gaps in contractors’ capacity to deliver projects – at a time when demand for residential property in particular shows no sign of slowing down.
 
There are early indications that sentiment in the real estate market has responded positively (the so-called "Boris bounce") to policies put forward by the new Conservative government, which was elected with a large majority in December 2019.
 
This is in contrast to the quarter running up to the election, when it was clear that many lenders were refraining from deploying capital in the real estate market and that transactional activity had largely been put on hold.
 
But this improved political certainty does not assuage practical concerns about Brexit that remain high on the agenda for many in the construction sector, the answers to which will ultimately depend on what arrangements the UK agrees in terms of work visas and trade tariffs.
 
Preparing for Brexit
 
Fieldfisher's Brexit Taskforce is issuing practical guidance to companies about what to do between now and 31 December 2020 to prepare for possible changes.
 
You can watch a summary of this guidance, including five key actions businesses can take, from our resident Brexit expert Andy Hood by clicking on the video on our Brexit home page.
 

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