The UK is scheduled to depart the European Union at 11pm local time on Friday 29th March 2019. Yes, I know it is quite hard to believe but it really is happening! As Brexit enters the final stage of negotiations with the European Union, the majority of UK citizens can’t help but nervously await that departure date. While both parties have provisionally agreed on issues such as the Northern Ireland border and the status of EU citizens living in the UK, we continue to wonder what Brexit means for our business.
The ongoing Brexit negotiations are continuing to cause a number of different problems for the construction industry, especially for us here at KDM Shopfitting. Back in January 2017, our content staff delved a little deeper into the whole Brexit debate and began to speculate what short, medium and long term impacts it would have on our business and indeed the industry as a whole.
Possible Change to International Trade
Recently, the British Government has launched its plan to become, as International Trade Secretary Liam Fox puts it, an “exporting superpower” – sounds good right? However, in terms of trade, the move away from the European Union may just turn Britain’s relationship with Europe on its already chaotic head. Here at KDM Shopfitting, many of our services and goods are delivered in Europe and the uncertainty of being in the single market has probed us to re-examine how Brexit will affect our relationships with them.
A first “must” to become “exporting superpower” is to establish clear and stable trade arrangements with other countries, however without economic certainty, it is difficult for us to do this. On a brighter note, all relevant parties in the industry will more than likely be affected and could be inclined to work together to limit costs and disruption.
Recent results from the Construction Industry Training Board analysis highlight that the number of construction companies feeling the brunt of Brexit has increased by 9 percent since last year. Like many others, the construction industry relies heavily upon certainty and market confidence. The uncertainty that Brexit carries has led many British firms to question whether they will be able to continue production with their EU partners – not to mention the possible delay of materials at the border if these relationships continue! In addition, the fact that companies in the construction industry are having significant difficulty in forecasting material and labour costs effectively, has a negative impact on our decision-making process hereat KDM.
Cost of Materials
So far this year we have rolled out manufactured workstations for an international client in various locations throughout Europe and we are currently negotiating works for 2019 onwards. I know what you are thinking, they seem to have everything under control!
However, in terms of costs, it is suggested that around two-thirds of construction materials are imported directly from the EU and while Brexit is in the final negotiation stage, the uncertainty of the Euro Zone is still evident. Even on a UK level, we are struggling to effectively price fixed-term contracts of up to 5 years with some of our major retailers due to the uncertainty of material costs imported from our suppliers in the EU.
Until negotiations are complete, the increased difficulties of costing materials imported from the EU still continue to challenge us here at KDM. The uncertainty of Brexit adds to the difficulty of running a business within a macro environment as clients are aware that prices will only go up and are looking to minimise their own costs in the medium term. For now, KDM and the rest of the construction industry have to wait and prepare for the negotiations to be finalised prior to the end of March 2019 whilst remaining wary of committing to pricing beyond this date.