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Brexit has ‘no impact’ on UK construction says Laing O’Rourke

19 Feb A detailed analysis of the UK’s withdrawal from the European Union, with or without a deal, has shown that it will have little or no impact on UK construction, Laing O’Rourke has determined.

The analysis of Brexit implications was led by Laing O’Rourke group finance director Stewart McIntyre, who explained his findings in the company’s 2018 financial review.

Stewart McIntyre writes: “Laing O’Rourke has analysed its current order book and pipeline and this review supports an assessment that, to date, a ‘no-deal Brexit’ would present minimal, if any, risk to current projects and liquidity forecasts. The business has also considered implications for the sector and, to date, has not identified any negative impact on the UK construction market either in the traditional built environment or infrastructure sectors. We are concluding that, based on evidence to date and assuming the sector’s clients continue with their projects, there are minimal risks to liquidity forecasts arising from any deterioration in revenue.”

He continues: “The business has conducted a detailed review of its staff and workforce with a full analysis across primary job families. Based on the most recent data, 16.1% of the total UK headcount are EU citizens and 23% of that total are Irish citizens who have the full ongoing right to work in the UK. This risk assessment has highlighted a dependency on EU nationals in certain job families and the business is monitoring developments in these areas, however, it is clear that earnings and rewards are such that it does not present a significant risk to staff retention, staff recruitment or the ability to comply with the minimum earnings threshold for securing visas.”

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Mr McIntyre also finds little to fear should the UK have to revert to trading under World Trade Organization (WTO) rules. “The UK business buys assets such as tower cranes as part of its core business and has conducted a detailed analysis on potential tariffs based on the past 12-month record of direct imports from the EU and possible registration procedures available to mitigate import supply difficulties,” he writes. “No tariffs apply under WTO rules to the import of tower cranes and it is assumed that additional customs procedures will create delays of no more than seven days. Apart from construction capital assets, the level of direct EU imports is low and the estimated additional costs arising from a ‘no deal Brexit’ are deemed to be immaterial.”

He concludes with a caveat that continued vigilance is required. “In summary, there has been no change to the group’s workwinning methodologies, or material negative impact on current live projects or staff recruitment and attrition. However, with the political environment continuing to develop, few companies can declare themselves immune to the risks of withdrawal from the EU. The board will continue to monitor developments in the UK business and political environment, and remains vigilant to the need to respond to changes in market conditions such as freedom of movement, finance and tariff implications, disruption to supply of plant and equipment and key construction components, logistics, exchange rates and primary commodity prices as we approach 29th March 2019, and for the period immediately after any other withdrawal date.”

Laing O'Rourke's phlegmatism in the face of political uncertainty is in contrast to concerns that the Construction Leadership Council (CLC) has aired to government. CLC co-chair Andy Mitchell has written to construction minister Richard Harrington, copying in the chief executive of the civil service, warning that “it will not be possible to mitigate all of the potential impacts of ‘no deal’”.  These include employment issues, trade in construction products, the future regulatory regime for construction products and potential impact delaying projects and adding costs.

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