Mathias Cheung discusses the latest developments relating to post-Brexit skills shortages in the construction and infrastructure industry:

• The Office of National Statistics has revealed a growing ‘Brexodus’ and less EU citizens coming to the UK as jobseekers.
• Industry bodies and figures have variously called on the Government to secure the rights of EU citizens in a matter of weeks.
• A House of Lord Select Committee report has recommended a new immigration policy to ensure the construction industry has access to much-needed migrant labour.
• The Government must take active steps soon in order to achieve its objectives in social housing and PF2 projects.

Since the first Brexit Bulletin, I have been discussing the potential impact of Brexit on labour resources in the construction and infrastructure industry (see, for instance, my earlier article on managing the risks of skills shortages). This has been a recurrent topic because it is vital not just to the industry and building projects in the pipeline, but also pressing socio-economic problems in terms of housing stock and infrastructure. Six months into the Brexit process, where are we really at right now?

Over the course of summer 2017, there have been harrowing reports of a growing ‘Brexodus’ of EU workers from the UK. There were, for instance, stories in the Financial Times of skilled EU professionals who have been prompted to return home where labour shortages and wages are both on the rise, and a year-on-year decline in EU workers seeking to come to the UK – the first time since 2012.

The problem is compounded by a reduction in applications from EU students to UK universities for professional degrees. For the construction industry which relies heavily on skilled professionals, this is no small challenge. The issue has already been flagged up back in March by the RICS, who was calling for construction professionals to be included in the UK’s Shortage Occupations List. So far, this proposal has not been taken up yet. Instead, both the Prime Minister and the Home Secretary have made it a point to stress that free movement of EU citizens must end by March 2019.

The Office of National Statistics’ Quarterly Report in August 2017 observed that, over the past year, the number of EU citizens leaving the UK has increased by a third to 122,000, which has in turn driven a decrease in net migration by a quarter to 246,000, particular citizens from the EU8 Member States. Most strikingly, it has been noted that EU citizens are now less likely to come to the UK as a jobseeker – something which could directly impact on the available pool of competent construction workers.

This may or may not indicate a long-term trend, but there is obviously a real risk to the UK’s industries if the Brexit talks do not make concrete progress soon. As Bank of England governor Mark Carney rightly warned in a recent speech, ‘abrupt decreases in migration could result in shortages in some sectors that have become reliant on migrant labour’, and the need to negotiate new trade deals is ‘likely to weigh on productivity for some time’.

The industries themselves have been expressing similar sentiments in the light of the latest statistics. Editor of Construction News Tom Fitzpatrick noted that ‘it’s getting tougher to find labour everywhere and the lack of clarity on Brexit is making things worse’. Most recently, in a rare joint statement, the Confederation of British Industry (CBI) and Trades Union Congress (TUC) have described the Brexit saga so far as ’15 months of human poker’, calling for a ‘clear guarantee of right to remain for citizens in both the UK and EU27… within weeks’ independent of the rest of the Brexit deal.

Good pick-up of @FrancesOGrady and @cbicarolyn joint statement on EU/UK citizens rights #brexit pic.twitter.com/ufxv69ciex

— TUC Press Office (@TUCnews) September 29, 2017

This escalation in tone is understandable. Despite the UK’s proposals published back in June 2017 of a new ‘settled status’ for EU citizens arriving in the UK before a ‘cut-off date’, the EU has been asking for more clarity on the terms of the offer, and the two sides have reached a complete logjam on the role of the Court of Justice of the European Union. It is true that the Prime Minister has softened her stance during her speech in Florence by proposing a new regime for EU citizens to continue to come and live/work in the UK after March 2019, but little thought seems to have been given to concrete immigration policies which would soften the blow of Brexit on businesses in the long run.

All is not lost though, as it is still too early to tell what shape or form the Brexit deal would take. In fact, some encouraging developments can be found in the ‘Brexit and the Labour Market’ report, which was published by the House of Lords Economic Affairs Committee on 21 July 2017. Importantly, that report recognised that:

1. EU nationals make up 7% of the UK’s total workforce, and for the construction industry specifically, 8.2% of workers within that industry are EU nationals in the year from July 2015 to July 2016 (paragraph 39).

2. The Government needs to provide a suitable implementation period for businesses to adapt their business models while retaining temporary access to the European labour market. This is necessary ‘if the Government is to achieve some of its other policy aims, such as building sufficient numbers of new homes or boosting investment in infrastructure, given the current shortages in the construction industry’ (page 4).

3. Above all, the Government should develop a new immigration policy and ‘consult on the needs of business and on a timeframe for implementing the new policy’. This policy should avoid blunt and arbitrary distinctions between low-skilled and high-skilled labour, as ‘British businesses must have access to expertise and skills in areas such as agriculture and construction that would at present be categorised as lower-skilled occupations’ (paragraph 52).

The Government has yet to respond to these recommendations, but it is clear that the voice of the industries have not fallen completely on deaf ears – indeed, the Minister for Immigration Brandon Lewis has reportedly been meeting with construction trade bodies to hear their views. There is still a lot more to be done though, and this is clear from the omission of construction from the priority sectors in the new inquiry launched by the House of Commons Business, Energy and Industrial Strategy Committee into Brexit’s impact on British business.

We have heard the Prime Minister commit to building more affordable housing for young people in her latest party conference speech, and the Government has long promised to reveal a list of new PF2 projects, but none of that would come to pass without an appropriate Brexit strategy and immigration policy to ensure a stable labour market for the construction industry. The Government must not let political pandering put the cart before the horse, and the construction and infrastructure industries as a whole have to make sure that the right debates are taking place down in Whitehall.

Mathias Cheung

Mathias’ practice covers all areas of Chambers’ work, including construction, engineering and infrastructure, energy and utilities, information technology, and professional negligence. In addition to these specialist areas, he has gained experience in a wide range of commercial disputes, including cases on fraud, insurance, assignment, subrogation, and conflicts of law. Mathias is also the winner of the SCL Hudson Prize 2015 for his essay entitled ‘Shylock’s Construction Law: the Brave New Life of Liquidated Damages?’.

As a native of Hong Kong, Mathias is fluent in both Cantonese and Mandarin, and he is therefore able to take instructions for cases involving Chinese-speaking parties and Chinese documentation in Hong Kong, Mainland China, Singapore and other jurisdictions.