Pre-Brexit, the construction sector struggled with a lack of skilled labour, being an industry well known for reliance on foreign labour. While accepted opinion is that the UK government is unlikely to send EU workers ‘home’, the uncertainty of the situation will undoubtedly give many foreign workers pause to consider whether they can or even want to remain in the UK following Brexit. The knock-on effect of a lack of skilled labour could result in projects being either delayed, being over budget or both.
Similarly, as sterling drops, the cost of importing supplies for projects will increase. While contractors with great foresight might have secured fixed sterling prices with their suppliers and/or agreeable fluctuation options within their contracts, those which have not may be unable to bear the consequences of sterling’s devaluation.
Where contractors have no ability to remedy increases in supply or labour costs, an employer might find itself having to renegotiate contract terms or face the undesirable consequences of a dispute or even worse, an insolvent contractor. For projects currently being tendered, the increased costs will surely be passed onto employers.
For contractors, a slowdown in the market might result in employers being unable to obtain continued financing, and thus an inability to pay their contractors. We will be monitoring the impact of Brexit for the construction industry and comment on legal implications as they develop.