How to minimise the impact of Brexit
In this article, James Stephens, Managing Director of Offsite Solutions, the UK’s leading bathroom pod manufacturer, looks at the impact of Brexit on the construction industry and how taking an offsite approach can mitigate some of the economic uncertainty.
According to the RICS, UK construction could lose eight per cent of its workforce post-Brexit – around 200,000 EU workers. The availability of labour in urban centres is one of the biggest challenges created by Brexit and could lead to significantly higher project costs.
If there are restrictions in the movement of labour, there will be pressure on wage inflation, which could be as high as 15% because of the reduced labour pool. The fall in the value of sterling also means that the UK will be a less attractive work destination and no longer the first choice for construction workers.
Over the last 20 years, the ready availability of overseas labour has resulted in very low levels of apprenticeships in the UK. If these workers do return to their countries of origin, the UK simply does not have sufficient domestic labour to address the skills gap.
How offsite is helping to address Skills Shortages
Offsite manufacture uses lean production techniques and better management of resources. This facilitates more efficient use of permanent, highly trained, multi-skilled labour with less reliance on subcontracted trades and improved quality control.
In-situ construction requires around seven different trades and ten-15 operations plus the required drying times. With offsite manufacture, this is reduced to a single supplier, which means less risk of delays and simplified procurement and project management.
Mitigating the risk of material cost increases
It is estimated that at least a quarter of all materials used in UK construction are imported – underlining the susceptibility of the industry to currency fluctuations.
Reports from manufacturers and construction companies predict material price increases of up to 20% because of the rising cost of materials imports and the pressure of the weaker pound. There is also the possibility of additional duties if the UK loses the benefit of the single market and limits are imposed on quantities.
We believe the use of offsite construction can mitigate the effects of Brexit because of the greater cost certainty it offers. The procurement of bathroom pods, for example, should be prioritised as the bathrooms will be delivered at an early stage in the project – even before the building envelope is installed. A better price can be agreed with early procurement and the risk of cost inflation can then be mitigated
The cost benefit of earlier procurement
As a bathroom pod manufacturer, we can achieve cost certainty because we have considerable buying power for bathroom products and materials – from taps, tiles and sanitary ware to timber, steel and oil-based materials for GRP. Long-term agreements with our supply chain give us the benefit of fixed annual prices. We place the orders for products and materials for the entire project as soon as our contract with the client is signed. Offsite manufacturers also have a more stable, longer-term, multi-skilled workforce and so are in a stronger position to protect against wage inflation.
With in-situ bathroom construction, several packages are tendered separately and typically at a later stage in the build programme. This leaves the contractor or developer much more exposed to cost increases for the finishing trades.
By entering into contract for factory-built bathrooms at an earlier stage, contractors and developers will secure a fixed price for one of the larger packages in a building project and at least 12 months ahead of the procurement process for in-situ bathroom construction. This provides critical certainty of cost and programme and removes the risk of wage inflation or material price increases.
Some positives resulting from Brexit
Whilst UK companies are having to grapple with higher costs, skills shortages and further pressure on the value of sterling, there are some positives resulting from Brexit.
Importing completed bathroom pods from Europe has become significantly more expensive. When this is combined with the longer lead times required for imports and the reduced responsiveness of manufacturers based outside the UK at the design stages, for delivery scheduling and in after sales, developers and contractors have been encouraged to focus on UK suppliers. As a result, we have seen much less competition from European bathroom pod manufacturers since the Brexit referendum which has had a very positive impact on our business and has to be good for British manufacturing and the offsite industry overall.
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