The commercial implications of Brexit

Rob Driscoll, ECA Deputy Director of Business, reflects on an ECA briefing for members in March 2019 about the commercial implications of the UK leaving the EU.

Our main speaker was Fergus Harradence, the BEIS construction lead, who spoke eloquently on the political backdrop, the political process and on the broader impact on the construction industry.

He highlighted that following the UK’s decision to leave the EU, the UK is not entitled to unilaterally postpone departure if desired, but it can ask the EU to do so.

Fergus also noted that delays at ports for the importing of goods, materials and equipment could be anywhere between 3 to 6 months in a no deal scenario, and that contractors should factor this into their plans in the months ahead.

My colleague Andrew Eldred (ECA Director of Employment and Skills) asked Fergus an intriguing question on the impact Brexit could have on our longer terms skills policy - specifically whether it could lead to the ‘junkie’ (i.e. businesses) having their ‘fix’ (i.e. overseas workers) being taken away?

Fergus gamely replied that the junkie was actually off the hard stuff, and was now on a dose of methadone, largely thanks to the Government’s apprenticeships policy.

My own presentation focused on busting some myths.

For instance, the real average percentage of directly employed workers in businesses is 70-75%. This raises the question among contractors of where the sector was sourcing the remainder, given that EU nationals represented 14% of the sector’s workforce.

The resulting prediction was that if the value of the currency goes down and there is a reduced workforce, the cost may increase.

I highlighted that exports and imports to the EU account for around 60% of construction materials, and that four of the top five products both imported and exported relate solely to the engineering services sector.

The resulting prediction was that if the value of the currency goes down, delays are likely on imported products (including the top 5, which account for 38% of all imported products), with the cost of materials potentially increasing due to the currency and their scarcity.

We then went into a deep dive on the commercial nitty-gritty, notably around whether businesses can utilise any contractual clauses in case of any knock-on impacts from Brexit…

In this context, I’ve been asked about ‘force majeure’ – but whatever you make of Brexit – it is not an act of God!

There is another way – what I am calling ‘force municipal’. Essentially this is a new clause you can request which specifies that any time or cost consequences incurred since the quotation date, which are due to Brexit, should give you a right to recovery under your contracts.

We have created some guidance on this, which will be available to download on the ECA member website. In here, you can also find a useful ‘Brexit risk assessment checklist’, which will help you analyse the broader risks faced by your business.

ECA’s CEO Steve Bratt wrapped up the event, held at the Barbican centre in London, with a flourish: ‘My son told me the if we really want to leave Europe efficiently, why not put the England football manager in charge?’

Whatever our views on Brexit, this is probably a sentiment we can all agree with.

This article originally appeared as ‘Brexit means Brexit?’ published on 15 March 2019 on the ECA blog. It was written by Rob Driscoll, ECA Deputy Director of Business.

--ECA

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