Skip to main content

How would Brexit affect the UK property sector?

Share

Research suggests the majority of the UK’s construction and real estate businesses back remaining in the EU. Simon England, head of Harrison Drury’s property and construction team, examines the key issues of the Brexit debate for the property sector.

A recent survey, carried out by accountancy firm Smith and Williamson has demonstrated that the majority of the UK’s construction and real estate companies will be backing the UK to remain a member of the EU, with only 15% saying there would be a positive impact in the UK leaving the EU.

There is an ever growing fear for property developers that while the debate around Brexit continues, the growing uncertainty may push down prices for commercial property. Many investors and developers are currently adopting the ‘wait and see’ approach before making investment decisions.

Investment decisions on hold

Rob Wilkinson, chief executive of AEW Europe, which manages £18 billion in property assets, has stated that any deals which his company make from now until the end of June will be conditional upon the UK voting to remain in the EU.

Similar echoes have been made by other real estate advisors stating that overseas clients are looking to delay buying in the UK property market until a vote is made. Some foreign investors have gone as far as including clauses within sale contracts making completion conditional upon the UK remaining in the EU.

However, research provided by estate agency Cluttons and YouGov, has found that a significant proportion of high-net-worth individuals from the Middle East have stated that they would still rank London as their top city of choice for real estate investment despite the looming uncertainty.

St George Wharf

St George Wharf, London

Half of those surveyed stated that a Brexit would have a positive impact or no impact upon their investment strategy and investment decisions. In a time of great uncertainty for many investors, this provides an opportunity to target investors from the Middle East.

Free movement and the labour market

The property and construction sector heavily relies on skilled overseas workers, aided by the EU’s fundamental principle of free movement of workers.

At present, many construction companies employ a large number of their employees from Eastern Europe. One of the biggest concerns in the sector is whether or not construction companies would be able to deliver on projects within tight timescales without access to the wider pool of EU workers currently relied upon.

Apprenticeships

Training and apprenticeships are offered to school leavers in the UK. Careermap.co.uk

The Home Builders Federation has stated that if a Brexit were to take place that this would lead to an increase in those skilled workers’ wages, and thus put a tougher strain on the bottom line of those businesses.

The UK government has introduced various initiatives to tackle this issue, such as training and apprenticeships for school leavers. However, businesses in the property and construction sector have aired concerns that these initiatives will not go far enough to make up for the shortfall of workers.

Arguably, the government could seek to put in place further measures to ensure workers from the EU would still be accessible to the UK market. Although, whether the government would deliver on this, given the potential impact in terms of costs, is questionable and could result in further frustration among the sector.

A red tape bonfire?

One of the biggest arguments in the campaign to leave the EU is that a Brexit would bring an end to the red tape currently placed on the sector and can be extremely burdensome. This would include the Energy Performance in Buildings Directive, which requires all construction work to be near zero carbon standards by 2020.

FMBThe Federation of Master Builders has argued that if the UK were to leave the EU, “that would be advantageous for small house builders for whom going further could be quite problematic.”

While the consensus is that reducing carbon emissions is a positive measure, the environment minister George Eustice has argued that a vote to leave the EU would allow the UK to “have the flexibility to change things, to improve things, to make things better, to try new ideas”.

That said, most of the guidelines and regulations laid down by the EU have been incorporated into the UK’s building standard and it is arguable that little would change.

Simon England leads a team of experienced property solicitors in Preston and at Harrison Drury’s other offices across the North West. For more information contact Simon on 01772 258321.


Questions & Answers

Leave a Comment

Leave a comment

Your email address will not be published. Required fields are marked *


x

Manage your privacy

How we handle your personal data

The General Data Protection Regulation (GDPR) gives you more control over how companies like ours use your personal information and makes it quicker and easier for you to check and update the information we hold about you.

As part of our service to you, we will continue to collect, use, store and share your data safely and securely. This doesn’t require any action on your part.

For more detailed information view our Privacy Hub