Brexit and the skills shortage

“Go home 2016, you’re drunk.” If you haven’t said it, you’ve heard it; in the year of Brexit and president-elect Trump it has become a popular way to express bewilderment at the unexpected turn of global events.

Those trying to build the one million new homes the government wants to see by 2020 might be forgiven for uttering the phrase more often than most. The UK housebuilding industry was in trouble even before the country voted in June to leave the European Union (EU), facing a critical shortfall of skills and labour. The possibility that Brexit will end freedom of movement from the EU threatens to compound the crisis, since almost a tenth of UK construction workers are from other parts of the bloc (see box, In numbers: Brexit and housebuilding).

“We could face a shortfall in the construction workforce if these skilled workers are prevented from working in the UK”

The Guinness Partnership

Tricky choices

Last month the independent Farmer Review of the construction sector warned: “The real ticking ‘time bomb’ is that of the industry’s workforce size and demographic.” It went on to describe an industry needing to be put into “special measures”. Shortly afterwards the Centre for Economics and Business Research cautioned that a tougher stance on immigration post-Brexit would “severely limit” housebuilding capacity and further deepen the housing crisis.

So where does this leave house builders in the North where, thanks to the government’s Northern Powerhouse initiative, the need for housing is expected to intensify? According to thinktank ResPublica, without a step change in the pace of housing delivery, Manchester, Leeds, Newcastle, Liverpool and Sheffield will face a shortfall of 86,220 homes by 2030.

The scale of the challenge leaves those building homes in the North of England facing tricky choices about how to shape their workforce. With little more to go on from the government than “Brexit means Brexit”, what plans are Northern house builders and developing landlords making to ensure their workforces are fit for purpose in a post-EU Britain?

The initial challenge is sizing up how badly Brexit might hit the region’s construction workforce.

“There’s evidence that, especially in city centres and large towns [in the North], the industry relies on foreign workers,” says Steve Turner, spokesperson for the Home Builders Federation (HBF). He adds that to meet the region’s Northern Powerhouse ambitions, foreign labour “is key to increasing their housing output”.

And developers shouldn’t hope that reduced economic growth following Brexit will chase their recruitment problems away. Though last month the Construction Skills Network said the number of new construction workers required in the North had fallen post-referendum, the region’s annual recruitment shortfall remained a sizeable 7,510 workers. Wood and electrical tradespeople and interior fit-out workers were among those most in demand.

Yet such data only goes so far in informing construction workforce decisions. What the industry needs is detail on what Brexit will look like. “For me there’s not enough clarity in relation to how the government is looking to proceed around border controls and how that all plays out,” says Mark Farmer, chief executive of Cast Consultancy and author of the Farmer Review.

The Guinness Partnership, which has around 1,750 homes in its North of England pipeline, is also left in the dark. “[The] skills shortage has been a concern for a number of years and we do not expect Brexit to improve this situation. It does depend on the details that will emerge around Article 50 and the negotiation of the terms of exit,” says a spokesperson.

“In the North, around 10-15% of [our] construction workforce are currently from the rest of Europe - they tend to be a skilled and motivated workforce, so we could face a shortfall in the construction workforce if these skilled workers are prevented from working in the UK.”

It’s a similar message from Jo Jamieson, managing director of Wates Residential, which is currently building more than 1,000 homes in the North. “In reality it is too soon to judge how Brexit could affect this challenge and we will only fully understand its impact once we establish what trade deals will exist for the UK and, crucially, what the subsequent changes to free movement of labour will be,” she says. “What is a certainty at this point is that whatever the impact of Brexit, we must be in a position where we are not so dependent on international labour.”

Uncertainty ahead

The sector is asking the government to consider exempting construction workers from tougher EU immigration rules post-Brexit. The HBF is holding discussions on the matter with Whitehall officials. “Our number one issue is that it’s absolutely imperative that we are able to access [EU] labour,” says Mr Turner. “We haven’t been given any information as yet as to how they’ll treat this, but… the government is clearly committed to increasing the number of homes built, so it seems logical.”

But Mr Farmer is sceptical. “It remains to be seen how this would work,” he says. “When you start carving out [exemptions] the issue is ‘where do you stop?’ because there are other industries… that rely on migrant labour.” The Department for Exiting the European Union has not responded to requests for comment.

House builders and developing landlords in the North are similarly cautious about the availability of skilled European labour post-Brexit. “With the uncertainty ahead we should now shift our skills strategy to simply topping up our domestic talent pool with international skills rather than having a reliance on it,” Ms Jamieson says.

Finding alternative workers is problematic, says the Guinness spokesperson. “We do not expect to see a shortage made up by construction workers from countries such as Australia and New Zealand. These workers already go to the Middle East, where they can attract higher wages, and we do not expect them to come to the UK in any greater numbers.”

Nor, adds the spokesperson, are they counting on domestic labour: “We do not see a likely upsurge in availability of skilled British workers to take up all that shortfall and construction is not something that can be done without training. It is dangerous and technical and on larger projects highly regulated, and the time lag to develop an experienced and skilled worker is lengthy.”

That is not to say that house builders and developing landlords in the North - as elsewhere in the country - aren’t trying to improve the homegrown labour pool. Indeed, Mr Farmer says a potential positive from Brexit is that “it will act as a catalyst for tackling some of the existing [construction workforce] problems”.

“It is absolutely imperative that we are able to access EU labour”

Steve Turner, Home Builders Federation

In June, the Construction Industry Training Board (CITB) and the HBF launched the Home Building Skills Partnership, a pan-industry body which aims to train 40,000 workers over four years, engaging with more than 3,500 organisations and 180 colleges and training providers.

Guinness, meanwhile, is working with the CITB to train apprentices in Leeds, with the training body finding work placements throughout its member companies. Other UK-based training initiatives include the 5% Club - of which Wates Residential is a member. Participating companies commit to at least 5% of their workforce being made up of apprentices, graduates or sponsored students within five years.

Still, the industry could do better, reckons Simon Leadbeater, managing director for residential construction in the Midlands and the North at Willmott Dixon. “To make a real impact there needs to be a universal approach [to training and apprenticeships] and this includes bespoke agreements for training commitments for developers working for registered providers and councils.”

There is, though, one definite bright spot in the North. Mr Leadbeater is among those who consider offsite construction - which requires a smaller, lower-skilled workforce than traditional housebuilding methods - to offer post-Brexit potential.

Mr Farmer agrees, arguing growth in this sector could boost Northern housebuilding in particular. “It’s clear a lot of the UK pre-manufacturing is happening in the North - Legal and General’s factory [near Leeds], Premier [Modular] in East Yorkshire and Elements [offsite construction] in Telford. The North stands to disproportionately benefit from that.”

Whether the region capitalises on that potential remains to be seen. For all the uncertainties, Mr Farmer is sure of one thing: house builders of all varieties should beware mistaking a post-referendum slowdown in construction for an end to their workforce woes. “Don’t think that because it’s suddenly easy to get bricklayers, carpenters and plumbers that it’s going to be OK,” he says. “That’s a very dangerous position to take.”