Costs for UK construction outstrips EU while exports fall

New analysis suggests that important costs for the construction sector have increased more steeply in the UK compared to EU countries with the largest inflationary difference being Brexit.

Figures sourced from the EU, EU member states and the UK Department of Business Energy and Industrial Strategy show that from 2015-2022 the cost of construction materials in the UK increased by around 60% compared to 35% in the EU over the same period.

Similarly, data from the BCIS suggests that the cost of construction workers in the UK increased by around a third between 2015-2021. In this time, Denmark and the Netherlands saw less than half the UK increase, with the cost of construction workers rising by 14.6% and 14.1% respectively.

With EU countries experiencing the same inflationary pressures from the Covid pandemic and the war in Ukraine, construction industry experts have cited Brexit as a key driver of costs. At an evidence session of the UK Trade and Business Commission this week, one witness claimed that Brexit was having the same impact as the energy crisis in increasing costs for the construction industry.

At this session it was also revealed that UK construction exports to the EU are still 34% lower compared to 2016-18 despite demand exceeding pre-pandemic levels. Witnesses cited new Brexit red tape as the cause.

The findings have increased concerns on the ability of the Government to address the critical housing shortage in the UK which is badly impacting renters and first time buyers, or to invest in important infrastructure projects. This week it was reported that Brexit may have directly caused a shortfall of more than 300,000 workers in the UK with sectors like construction and hospitality worst affected. 

The research comes as the cross-party UK Trade and Business Commission launches the UK’s first economy-wide consultation to gather evidence on the biggest issues facing all industries in the post-Brexit landscape. The evidence will be used to create a new trading framework for the decade ahead including immediate and long-term recommendations, and guidelines for future trade negotiations to ensure opportunities do not come at the cost of existing British industries.

Businesses can submit evidence to the consultation here.

At an evidence session of the UKTBC, D’Maris Coffman, Director Bartlett School of Sustainable Construction at UCL said,

“Brexit and the energy crisis, energy security issues, are simply cost drivers.

“On balance, I would agree that Covid is the least of the three, probably a fifth all told, and that Brexit and the energy crisis are probably about two fifths each, about 40% each.”

Noble Francis, Economics Director, Construction Products Association added,

“Major companies that are exporting construction products to the EU have large teams and can deal with the admin, the bureaucracy, the additional costs. The key issue is for the smaller firms that would be exporters.

“They have struggled with the additional resource cost, admin, bureaucracy-wise and so that’s why you end up at a point where exports of construction products to the EU are still more than one third lower than before.”

After the session, Hilary Benn MP, co-convener of the UK Trade and Business Commission, said: 

“It is clear that Brexit and its subsequent trade deals have created many more problems for UK businesses than opportunities. 

“This consultation will enable the day-to-day experience of British firms to influence proposals for a new trading relationship. We are looking not only for answers to immediate problems but also ideas for future trade agreements which can create opportunities for both established and new British export businesses.”

NOTES

*The EU has only published figures on the cost of construction materials for European countries up to 2021 when it recorded a 22.1% increase since 2015. For the year 2022, an average was created from EU countries which continue to report on the cost of construction materials relative to 2015. The average between Ireland, Denmark and The Netherlands for the year 2022 was a 35.1% increase since 2015. This information could not be found for France, Germany, Italy or Spain.

**The EU does not provide a cost index for labour as a result of low coverage as stated here (see end of first paragraph).

Sources

Cost of Construction materials - BEIS / EU / Trading Economics

Cost of Construction Labour - BCIS / Statistics Denmark / Statistics Netherlands