The Brexit hokey cokey
It is of no great surprise that UK contractors, like so many other sectors of the economy, face uncertainties over the coming months and years due to the dreaded ‘B’ word: Brexit.
The bad news…
Construction site workers will likely fall into the Government’s ‘lower skilled’ bracket which may well pose a threat to industry recruitment with the obvious knock-on effects on profitability in the sector. The sector has always been heavily reliant on EU continental workers to make up a skilled workforce with an estimated 120,000 EU nationals working in the sector.
Given that a large proportion of UK construction projects are funded by money derived from outside of the UK the fall in the value of Sterling means that both the potential earnings available to foreign investors and the remittances available to foreign construction workers are reduced. This will potentially lead to a reduction in the foreign investment available and a reduction in foreign workers available to carry out work.
As well as the skills shortage potentially pushing up costs, the price of materials is also rising, largely as a result of the fall in sterling. Anything imported from the eurozone and further afield will likely become more expensive. Unless a construction firm has defined these costs in its contracts, it will have to bear these additional expenses. There’s also the potential for these costs to increase further, depending on the trade deal struck with the EU. If the UK is unable to replicate the arrangements currently in place, this could have an inflationary effect on costs. If materials end up stuck in ports waiting for the appropriate paperwork to enter the UK, it will also increase time pressures on construction projects.
The good news…
Controls over immigration should make it easier to establish whether workers are legally entitled to work in the UK, as well as making it easier to verify UK-earned qualifications. A greater reliance on widely respected UK Health and Safety qualifications should in theory lead to a greater emphasis on Health and Safety in the workplace and hopefully correspond with a reduction of accidents ‘on-site’.
For the UK retail insurance broker working on behalf of UK SME contractors the potential increase in wages and construction costs that contractors may have to pay in a post-Brexit world will potentially lead to increased financial estimates for the coming financial years; leading to potential greater premiums payable even before we consider the reduction in available carriers and hardening of rates.
What it all means for Compass-supporting Insurance Brokers
The majority of our supporting brokers in the UK SME sector should not be affected too severely by upcoming uncertainty over Brexit.
Your UK SME clients working exclusively within the United Kingdom will continue to be insured by the UK Composite and London market without significant changes.
UK SME contractors undertaking occasional work abroad (whether within or outside the EU) will, under current proposals continue to be insured by their UK insurer; subject of course to agreement from said insurers and full contract details being submitted prior to commencement of contracts.
Where more substantial works are being undertaken outside of the UK, Compass London Markets can still provide assistance and advice to brokers and their clients who are quite understandably becoming confused by the current uncertainty.
In recent weeks, Compass London markets have “made the difficult easy” by securing terms for a client who was operating cherry pickers across Europe, North Africa and the Middle East, another who was undertaking works in a territory under US sanctions and another who was providing security services in a variety of hostile territories.
Regardless of the difficulty of your enquiry and regardless of how many markets have already declined to offer terms, speak to the Property and Casualty team at Compass London Markets – they’ll be only too happy to help. You can find all of our contact details here.