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Brexit impact on Supply Chains for Construction

Questions to the Mayor of London – answered on 6th November 2019.

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Photo of Nicky Gavron Nicky Gavron Labour

Apart from the impact on skills and workforce, what will the impact of Brexit be on and construction supply chains generally and building materials for homes? What can London can do?

Photo of Sadiq Khan Sadiq Khan Mayor of London

Thank you, Chair. As I and many others have long warned, a no-deal Brexit will be a disaster for homebuilding in London. We know that the capital’s homebuilding industry, from architects designing the homes to construction workers making them a reality, relies heavily on EU nationals. We also know that the UK is particularly reliant on imported building materials with almost two thirds of imports being from Europe. The imposition of new tariffs, a weaker pound and new costs and delays for goods clearing customs will cause build costs to rise and significant disruption to supply chains.

Even ahead of Brexit, continued uncertainty about what will happen is already affecting the housing industry. Our housing association partners have reported that the value of tenders from large reputable builders have recently shot up in anticipation of our departure at the end of the month. This is due to increasing risk premiums, the cost of transport and warehousing and in some cases a predicted shortage of labour. Reduced availability of construction materials is another factor in a toxic mix. Builders will simply down tools if schemes become undeliverable. This will undermine London’s ability to meet its housing needs in the short term and will present longer-term obstacles for economic recovery.

I have already made £200 million available to protect affordable homebuilding in the face of Brexit uncertainty and my officers will continue to work on other contingency plans.

Photo of Nicky Gavron Nicky Gavron Labour

Thank you, Mr Mayor, for that answer. What you have been saying is generally reinforcing something that is not really known very much, which is how dependent we are on EU imports for construction of our buildings in London and of our homes in particular. You have said that somewhere between 60% and 70% of our supplies, products and materials come from the EU. That is glass. It is window frames. It is bricks. It is cement. It is steel. It is also electrical goods and components.

What is not so well known is how the EU is also responsible for the regulation, for the testing and for the setting of standards on products and materials. As you have highlighted, there will be, inevitably, whatever deal there is - or, even worse, no deal - there will be delays in terms of logistics. There will be tariffs and costs will go up.

Are you concerned and what can we do about the fact that construction companies will inevitably have to seek new supply chains outside of the EU and the result of this will probably be that there will be substandard and poor-quality products coming into the country?

Photo of Sadiq Khan Sadiq Khan Mayor of London

That is absolutely right. I have a few things. Firstly, the bad news is that developers are not able to stockpile materials. Some are stockpiling some stuff in warehousing, but it is not possible to stockpile some of this stuff.

You raised a really important point about standards. We know when goods come from the EU that they are of a certain standard. If, for example, as members of this Government are claiming, we should not worry because we can import stuff from other parts of the world, I question what standard they will be at. It is a big concern that many developers and builders have. We are working with developers. We are lobbying the Government to share with us the information it has.

One of the things that we have been lobbying the Government to do is to have an active industrial strategy to make up for some of the losses we may face in Brexit and that the active industrial strategy also goes towards homebuilding and affordable homebuilding in light of the fall in the sale of market value and luxury properties as well. It could be an opportunity. The problem is, if we cannot get materials, we cannot have an active industrial strategy and so we are hoping that cooler heads will prevail, there will not be no-deal Brexit and, if we do leave the EU, there will be a transition so that we can still have goods and materials coming into our country to build the homes we so desperately need.

Photo of Nicky Gavron Nicky Gavron Labour

Thank you. From talking to the industry, they say that it is very well known, something you have also pointed out, what the impact of Brexit will be on the workforce, but what is not known - and in fact it seems to be an information desert, if you like, a national black hole - is anything about this issue of supply chains.

Apart from all the lobbying that needs to be done on the Government, working with industry partners, will you prioritise and lead on this issue and make it part of your Resilience Strategy?

Photo of Sadiq Khan Sadiq Khan Mayor of London

Sitting to your left is the Chair of the London Resilience Forum and we will make sure we take that up in the first meeting this Monday.

To give you an idea of the scale, more than 90% of our timber comes from the EU. A significant amount of our steel comes from the EU. As you will be aware, one the reasons I mentioned Tilbury Docks in answer to a previous question is that that is the way some of this comes. We will make sure it is raised at the Strategic Co-ordinating Group and also at the Resilience Forum.

It is your right. It is not just construction workers - and we are already concerned about construction workers - but also the materials we need for residential and commercial buildings as well.

Photo of Nicky Gavron Nicky Gavron Labour

Thank you for that answer. Thank you, Chair.