黑洞社区

It鈥檚 not often that data about the number of people applying for jobs in nursing sends shockwaves through the construction industry 鈥� but last week鈥檚 figures showing a 96% fall in applications from foreign EU nationals may be an exception. The data, from the Nursing and Midwifery Council, stokes industry fears that, whatever Brexit deal the UK finally achieves, the flow of skilled labour to these shores from across the EU could be about to cease.

鈥淣ursing is the classic case of what can happen,鈥� says consultant Mark Farmer, author of last year鈥檚 government-commissioned report on construction labour 鈥� Modernise or Die 鈥� the title of which was supposed to act as a warning to the industry. 鈥淭he real danger is that we have the same thing in construction 鈥� fewer and fewer deciding to come to the UK,鈥� he says.

Official data shows how the industry is reliant on overseas labour, from Eastern Europe in particular. The proportion of foreign-born construction workers doubled between 2004 and 2014, to around 12% of the 2.1 million-strong workforce, according to the ONS Labour Force Survey. While EU migrants from the accession states 鈥� the EU鈥檚 new members in Eastern Europe 鈥� make up about half of that migrant construction workforce.

But if this overall picture presents a big challenge, the concern in key construction markets like London is much more extreme, where migrants make up a majority (54%) of construction workers. According to the Greater London Authority, 25% of construction workers in the city were from elsewhere in the EU, and anecdotal evidence suggests the situation is similar in other major UK cities.

With the industry already facing severe skills shortages, and the shape of a future Brexit deal looking less clear by the day, it is hardly surprising that major construction employers are wondering what all this will mean. 鈥淭hey are hugely worried about retaining the labour force. It鈥檚 the biggest issue facing the industry,鈥� says Steve Beechey, group strategy director at contractor Wates. So, have European construction workers already started going home? And how will the industry cope if they do?

Dire predictions

There is no shortage of dire predictions of what will happen to UK construction without the support of EU staff. The RICS has calculated that 8% of the UK construction workforce is potentially put at risk by Brexit, and Lewis Johnston, parliamentary affairs manager at the body, says that without a deal guaranteeing rights for existing and future EU staff, 鈥減rojects won鈥檛 be delivered, there could be delays and it will increase the cost of projects鈥�.

The knock-on is that the government鈥檚 ambitions in other areas, which rely on infrastructure and housing, could be in jeopardy

Lewis Johnston, RICS

For example, housebuilder Barratt Homes, in evidence to the All Party Parliamentary Group (APPG) for Excellence in the Built Environment, said 59% of its London workforce was from the EU.

The RICS鈥� Johnston adds: 鈥淭he knock-on is that the government鈥檚 ambitions in other areas, which rely on infrastructure and housing, could be in jeopardy.鈥� Last year a study by consultant Arcadis estimated that a 鈥渉ard鈥� Brexit which installed the same points-based immigration system for EU staff as already exists for non-EU workers, would see 215,000 fewer EU workers in the UK by 2020, turning the current skills gap into a 鈥渟kills gulf鈥�.

Government data suggests some workers are already leaving, despite there being no legal change to their status so far, though it is important to point out that overall there are still far more EU citizens coming to the UK than heading back. Figures from the Office for National Statistics (ONS) show that migration from the accession states 鈥� which provide most of the UK鈥檚 EU construction labour 鈥� shifted significantly. The number coming to the UK in 2016 from the so-called EU8 states (Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia), which joined the EU in 2004, dropped by a third to 48,000, and the number leaving the UK rocketed by 59% to 43,000 鈥� nearly as many as arrived. Meanwhile the number of workers returning to Romania and Bulgaria (the EU2 countries) doubled 鈥� though it is still far below the number arriving.

Workers鈥� unease

But with no legal change, why would staff look to return home? Gail Cartmail, assistant general secretary at construction union Unite, said: 鈥淭he workers who are leaving feel that they are no longer welcome here and fear that they and their families will be abused and mistreated.鈥� Indeed Wates鈥� Beechey admits that around the time of the referendum he picked up anecdotal reports of foreign staff encountering bullying on site, and while there is little evidence this is widespread, he worries it contributed to a feeling that 鈥渢here is not a future here for them in the UK,鈥� he says.

Jonathan Portes, professor of economics and public policy at King鈥檚 College, who has studied the issue of Brexit and migration, agrees with this assessment: 鈥淚t鈥檚 early days, and part of the driver for the change is a slight slowing in the economy, but mainly it appears to be Brexit. There鈥檚 a psychological impact 鈥� migrants feel less welcome, and that their prospects here are less certain than they were.鈥�

The ONS figures, however, which are for the economy as a whole, do not shed light on the situation for construction specifically. According to Florian Moldoveanu, the Romanian-British chief executive of London-based social housing contractor Pilon, the situation for construction specifically is not as desperate as these fears suggest 鈥� at least, not yet.

The mindset of first generation emigrants is very resilient. They are not going to be that sensitive to whether they鈥檙e not feeling welcome

Florian Moldoveanu, Pilon

Pilon, founded by Moldoveanu 15 years ago, employs around 500 people, of whom he estimates around 75% are Eastern European. While he and the Europeans in his workforce were profoundly disappointed by the result of the referendum, so far he has seen no exodus of skilled staff. 鈥淔or Romanian workers, the UK had clearly been top of the list on the basis of the pay and the ease of utilising their skills.

Brexit has diminished the UK so now other countries are close to it 鈥� but it鈥檚 still top.

鈥淭he mindset of first generation emigrants like these is very resilient, very pragmatic. They are not going to be that sensitive to whether they鈥檙e not feeling welcome. They鈥檒l put up with a lot.

鈥淲hat will change that is if the government starts implementing policies that affect their ability to earn a good paycheque 鈥� that鈥檚 when they鈥檒l go away.鈥�

Moldoveanu says the ease of getting the tax benefits of self-employment, for example, is a key driver for the UK鈥檚 current attractiveness 鈥� take that away and Eastern Europeans might change their view. Subjecting Europeans to the immigration system currently in force for non-EU migrants would also restrict the flow. 鈥淭hen you will see people leave in droves,鈥� he says, though he is confident things won鈥檛 get to this stage. 鈥淎ny decent government will have to work with the industry to put things in place to allow construction to carry on, otherwise things will shape up very badly. If you stop the pipeline of workers all sorts of things will happen.鈥�

An uncertain future

While the election looks, for the moment, to have lessened the chances of a 鈥渉ard鈥� Brexit, it has also made the government鈥檚 strategy harder to predict. The Conservative manifesto offered little to allay construction鈥檚 fears over skills, with policies to make recruitment of overseas workers harder and a renewed commitment to reduce net migration to under 100,000 per year, but it is not clear how much will be implemented.

Farmer says: 鈥淭he government doesn鈥檛 want to share its negotiating hand, and that means we will have to live with continued uncertainty, just when the industry doesn鈥檛 want it.鈥�

The manifesto also promised to create an immigration policy tailored to the business needs identified in the government鈥檚 forthcoming UK industrial strategy. However, it is not yet clear whether construction will manage to play a significant role in the industrial strategy, given it was barely mentioned in the January consultation.

There鈥檚 a psychological impact 鈥� Migrants feel less welcome and that their prospects are less certain than they once were

Jonathan Portes, King鈥檚 College

Dr Heather Rolfe, associate research director at the National Institute of Economic and Social Research (NIESR), says business concern is understandable given existing immigration rules for non-EU citizens, which don鈥檛 allow in the tradespeople construction needs.

鈥淭he current rules wouldn鈥檛 allow skilled trades in; they鈥檙e pretty much [just] about filling graduate positions,鈥� she says. 鈥淓mployers are really concerned about what would happen if this kind of system was put in place across the piece. They鈥檙e worried a future immigration policy won鈥檛 take account of the needs of the sector.鈥� The high degree of self-employment in construction creates an additional difficulty in forming an effective policy.

Firms are already raising concerns about the impact of any migration clampdown not just on the ability to staff projects 鈥� but the cost of labour, quality of build and the overall price of buying construction. Moldoveanu predicts increasing quality problems if labour flows are restricted, leading to 鈥渉igher and higher pay rates鈥� for the best staff.

In its submission to the Built Environment APPG, contractor Balfour Beatty warned of the direct impact on taxpayers: 鈥淯ncertainty around the free movement of labour in the EU could cause the industry recruitment and staffing difficulties and may increase costs where demand for labour outstrips supply [鈥�] as the costs of government funded construction projects increase taxpayers will carry the burden,鈥� the submission said.

Wates鈥� Beechey says: 鈥淚f the UK blocks people from coming over, the impact upon construction prices would be very significant.鈥�

Greater volatility

Many that voted to leave the EU, of course, would say that increasing wages for skilled UK workers is no bad thing, contradicting the Remain camp view that freedom of movement didn鈥檛 suppress pay. But if there were to be a boost to workers鈥� wages, researchers believe there would also be a flip side to the coin 鈥� greater employment volatility, without temporary migrant labour to even out peaks and troughs in demand. The Chartered Institute of 黑洞社区鈥檚 APPG submission said that 鈥渢he loss of the dampening effect of migration on the UK construction labour market鈥� would subject workers to 鈥減eriodic bouts of deep job losses鈥� and 鈥渕ake working in construction more precarious and less attractive鈥� to UK staff.

Any decent government will have to work with the industry to put things in place to allow construction to carry on [鈥�] otherwise things will shape up very badly

Florian Moldoveanu, Pilon

The cyclical nature of construction would, therefore, pose an even bigger challenge to employers and staff alike than it does now. The NIESR鈥檚 Rolfe says: 鈥淓ven if the UK trained more of its own staff it would still be very difficult to meet demand from the industry because there are so many peaks and troughs.鈥�

Unite鈥檚 Cartmail says the only way to address the problem is to massively increase the training of apprentices 鈥渋mmediately鈥� or else face 鈥渟tark鈥� consequences. 鈥淭he industry is currently only functioning because of our reliance on migrant workers, due to our abject failure to train apprentices,鈥� she says.

Certainly there is anecdotal evidence of increasing training rates, particularly in the housebuilding sector, in recent years. For Farmer, the only option for the industry is not to waste effort lobbying the government for the continuation of any temporarily relaxed immigration rules, but to focus on modernising the industry through modern methods of construction to make it less reliant on migrant labour.

鈥淚t would be the wrong strategy to focus on protection from Brexit,鈥� he says. 鈥淚t should be about future-proofing the sector. If modernising the industry is five to 10-year process, then it must start now 鈥� not in five years鈥� time.鈥�