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Brexit: What does it mean for the Construction Industry

The recently concluded Trade and Co-operation Agreement, which came into effect on the 20 January 2021, is likely to impact on the construction industry in the UK in four main respects namely:

  1. A new UK regulatory framework and harmonisation standards;
  2. A mutual recognition of goods and product marketing;
  3. Movement and cost of materials; and
  4. Workforce shortages.

The trade deal will enable construction companies to continue to reliably forecast the cost and availability of products and materials imported from the EU and the mutual co-operation in respect of reducing technical trade barriers and co-operation of the border. This will no doubt assist to avoid some of the risk of delay and disruption.

This article seeks to address the four ways referred to above, in terms of how Brexit may impact on the construction industry:-

1. A new UK regulatory framework and harmonisation standards

The Construction Products Regulations provides harmonised rules for the marketing of construction products. The standards defined and methods and criteria for assessing the performance of a product in relation to its essential characteristics and such products are marked with a CE mark to indicate compliance with the applicable standards. The CPR will be converted into UK law and the government produced a draft statutory instrument, which came into force upon the UK leaving the EU, detailing the future arrangements that are to apply. All existing European harmonised standards will become UK “designated standards”, meaning that EU and UK standards are now identical.

The amendments were intended to adapt the former regime so there would be minimal disruption upon the UK leaving the EU. To that end, standards applicable in the UK will continue to be closely aligned with the EU.

Construction products already placed on the UK market pre-Brexit will, therefore, remain compliant with the applicable UK standards and so will be able to circulate.

New UK standards will now be designated by the Secretary of State and it is therefore possible that in the future UK and EU standards will diverge over time.

2. A mutual recognition of goods and product marketing

In November 2020, the government published various policy papers on the United Kingdom Internal Market Bill including two on market access and the principle of mutual recognition.

Mutual recognition will underpin the operation of the UK internal market for goods. The goods must meet the relevant regulatory requirements in the part of the UK it is produced in or imported into to qualify for mutual recognition, thus allowing the goods to be sold in any other part of the UK without having to meet relevant regulatory requirements in that other part.

Regulatory requirements that will be disapplied under mutual recognition are to be known as relevant requirements and generally the good itself.

As well as applying to the sale of goods, the mutual recognition principle applies to a wide range of supply-related activities.

Requirements relating to the manner in which a good can be sold will not typically be “relevant requirements”.

Products that comply with relevant requirements at the location of their production can be sold throughout the UK to ensure that local producers are subject to their local requirements. The legislation defines “produced in” as the place where the most recent significant production step that is a regulated step has occurred. A production step must be significant in terms of the character of the goods or their purpose and a step is regulated if it would be subject to regulation in the part of the UK where it has been produced or, alternatively, it is a step that means that goods could not be sold in that part of the UK, as they would contravene regulation in that part.

From the 1 January 2021, there are three different product marks that manufacturers and others in the supply chain may need to apply. The rules governing these marks will depend upon where the product is intended to be used.

The three marks are:-

  • the EU’s marking for products conformity (CE-marking);
  • the United Kingdom conformity assessment mark; and
  • the United Kingdom/Northern Ireland mark.

Depending on the regulations of each jurisdiction, the manufacturer may be required to use the services of a conformity assessment body to show their product meets the required criteria.

Notably, the role of notified bodies, which were previously authorised to assess products conformity with CPR have now been taken over by approved bodies in the UK.

New products assessed by UK approved body will have to be marked with a UK mark to indicate compliance with UK designated standards in the same way that products had previously been marked with a CE mark.

EU products with a CE mark will still be able to be placed in the UK market without the need for further testing or additional marking but the policy intention is this option will be available for a limited period; although the duration is not decided.

While EU and UK standards may remain aligned for some time and there will be an initial period when CE marking will be sufficient for products to be sold and used in the UK, both manufacturers and users of construction products should ensure they understand the changes being made.

3. Movement and cost of materials

Brexit will have a significant effect on the trade of goods between the UK and the EU and it would be prudent to take action to ensure that the supply chain of your business is not disrupted.

Practical steps can be taken to minimise the negative impact of Brexit on importing goods from the EU including checking with EU partners on what arrangements they have put in place since the 1st January 2021.

There are now additional checks in place, and paperwork involved, at the UK borders, so forward planning will be needed to manage the new customs process.

Equally, if buying through UK wholesalers, you need to ask the same questions of them and check that they have processes in place with their EU suppliers to mitigate the effects of Brexit.

Contractual terms with EU suppliers should be reviewed and updated to ensure faulty products can be returned and made good at no cost and issues such as delivery, time and damages for late or non-performance should be reviewed.

4. Workforce shortages

Freedom of movement for workers has been one of the most contentious aspects of Brexit.

Freedom of movement between the UK and the EU ended on the 1 January 2021. After this date, anyone wishing to work in the UK is now subjected to a points-based application system, which is designed to attract “skilled workers” i.e. with a skill level threshold equivalent to A Level. This will include architects, engineers, quantity surveyors and also trades such as bricklaying or carpentry but excludes several roles such as general labourers and plant operators.

An application will need to produced as evidence of a job offer at the required skill level that meets a new minimum salary threshold. This has obvious implications for the construction industry, as the majority of the labour force do not attract salaries at the required threshold. Even if the criteria are met, ongoing sponsorship costs to bring workers to the UK will be prohibitive for many.

Notably, whilst visa’s will not be required for most business travel across the EU for short stays of up to 90 days in a 180 day period, work visa’s will be required for those intending to work for longer periods of time.

A shortage of labour may also create wage inflation, which would be a cost borne by contractors.

It’s important to understand how the recent Brexit deal might affect your business operations. For help and advice that is tailored to you and your business, please get in touch with Martin Collingwood, head of construction at Andrew Jackson Solicitors LLP – Tel: 01482 325242 or email: martin.collingwood@andrewjackson.co.uk

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