The rapidly approaching referendum on 23 June 2016 to decide
whether to stay in or leave the European Union (EU) is an issue for
all businesses. Uncertainty is one of the key concerns for the
construction industry which relies on a steady flow of investment
to keep the cash flow wheels turning. In addition, available
manpower is already an issue for the industry – and the
prospect of the removal of the right to the free movement of
workers within the EU will send chills down the spines of many
human resources teams.
A Brexit could therefore lead to "trouble" but the
reality is that no one really knows what will happen if we vote to
Our summary of issues for construction businesses was included
in our recent briefing: "The Great Brexit Debate" and we have set it out below for
ease of reference. The full briefing sets out the implications for
the UK legal and regulatory framework and includes a section on the
effects on the infrastructure sector including transport (railways,
roads, airports and ports), water and sewerage, schools and
The effects of Brexit: construction focus
From the construction industry perspective, a potential Brexit
would have ramifications across a number of areas including:
There would be multiple employment law issues. For example, the
introduction of labour market restrictions would likely mean fewer
available skilled workers, an increase in wages and project costs
and delays to projects. In addition, UK staff might not be able to
move so freely to work on projects in Europe. It would also be
worth considering how other EU laws such as those on working time
regulations, disability and discrimination would be affected.
The uncertainty caused by Brexit will affect foreign and
domestic investment in UK projects in the short term, at the very
Regulation and trade
The body of regulations governing procurement of projects across
the UK and Europe would be likely to change, which might affect not
just how tender processes are handled but, potentially, also the
chances of success for UK bidders in Europe and the scope for
encouraging EU businesses to bid for work in the UK. Trading with
European partners and trading terms and conditions would be
affected, not just in terms of export and import tax but also in
how they might be affected by international trade agreements
negotiated after Brexit. There may be a very significant increase
in costs of imported material—in particular steel—due
to the weakening of the pound.
Contracts and dispute resolution
Contracts already in place would need to be reviewed to ensure
that Brexit did not fundamentally change the nature of the
agreement, and renegotiation might be needed to ensure Brexit did
not lead to contract frustration. Parties to contracts would have
to reconsider terms dealing with dispute resolution, jurisdiction
and choice of court, service of proceedings and enforcement of
judgments. A substantial body of EU law that affects construction
businesses is already enshrined in UK law, for example the CDM
Regulations and the Building Regulations. While these laws would be
unlikely to change in the shorter term, changes, for example to
reduce perceived "red tape", would be inevitable.
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