Construction Industry

Whitepaper: How has the MAC report affected the UK construction industry?

Brexit is currently causing a lot of concern for a lot of people. The level of uncertainty surrounding the UK’s departure from the European Union is beginning to make many businesses and individuals feel quite confused about what life will look like after Brexit has taken place. In the construction sector there are many ways in which post-Brexit changes could make an impact, from pricing of materials through to availability of work. But perhaps one of the most critical elements where Brexit could be influential is when it comes to the availability of workers.

In September 2018, the Migration Advisory Committee (MAC) Report on the impact of EEA migration in the UK was released, designed to try to introduce some clarity into the process. However, far from feeling reassured, the construction industry largely responded with disappointment and dismay to the contents of the report. In this whitepaper we’ll look at the MAC, its report, as well as the potential impact of the recommendations that are contained within it.

What is the Migration Advisory Committee?

Contrary to what many believe, it is not a governmental body. It has an advisory role and is sponsored by the Home Office but the MAC is a non-departmental public body that is independent and non-statutory. So, there is no obligation on the government to accept the recommendations that are contained in the report. The purpose of the MAC is to provide support to the government on immigration issues. This could include any issues or potential events that affect the UK, not just Brexit – for example its remit also covers the impact of international students on the UK. Given the fact that immigration is one of the biggest issues to affect the UK in the context of Brexit, the work done by the MAC has a crucial role to play in helping to guide next steps in the right direction.

The report

The MAC was commissioned in July 2017 by the Home Secretary to report on the current and likely future patterns of EEA migration and the impacts of that migration. Its purpose can be broken down like this:

  • To provide an evidence basis for a new migration system that would come into force in 2021.
  • To integrate a broad spectrum of perspectives across all sectors and regions in the UK, and to provide an insight into a range of different impacts that immigration has, and could have.
  • The impacts included public finances, house prices, consumer costs, unemployment, productivity, wages and innovation.

One of the main recommendations of the report was that that there should be a less restrictive regime for higher-skilled workers than for lower-skilled workers. The reasoning behind this was outlined as:

Higher-skilled workers tend to have higher earnings so make a more positive contribution to the public finances. The estimated labour market impacts, though small, also suggest that higher-skilled workers are of greater benefit as do any impacts on productivity and innovation. A shift towards higher skilled migration aligns with the Government’s industrial strategy published last year.”

It’s this recommendation that has proven the most problematic in terms of the responses to the MAC report. In the report, the MAC acknowledges that “some sectors will lobby intensively against this proposal” but, despite this insight, has not altered its recommendations.

The use of Tier 2

The MAC report recommends that the current Tier 2 immigration system be used as a template for whatever immigration system replaces the free movement of workers that the UK has enjoyed while part of the EU. Tier 2 is part of the UK’s five tier immigration structure. It applies to those who are skilled workers and would not be a visa option for lower skilled migrants. Those entering under the current Tier 2 system would need to have a skilled job offer from a UK employer who has the right kind of licence. Occupations that are acceptable must be on the list of approved occupations list. The system is almost completely based on skill level.

How does the construction sector currently use migrant workers?

It’s no secret that there are many roles in construction that are currently filled by non-UK residents. That’s particularly so with respect to many of the lower skilled occupations.

  • 2018 figures from the Office for National Statistics (ONS) show that around 2.2 million people worked in the construction sector between 2014 and 2016.
  • 7% of workers in the construction sector are EU27 nationals, as opposed to the 6% that make up the workforce across other sectors.
  • 3% are non-EU workers, compared to the 4% across other UK sectors.

What these figures clearly demonstrate is that construction is an industry likely to be disproportionately impacted if the flow of workers from the EU is stopped.

In London, the situation is even more worrying for the construction sector. Around 28% of those working in London construction during the period of the ONS figures were EU27 nationals. In other sectors in London this figure was just 13%. Given that the construction industry in London is worth in excess of £30 billion to the UK economy, the damage that could be done as a result of a lack of available workers could go a lot further than just the industry itself.

An existing skills shortage

All of this is taking place against a backdrop of a serious skills shortage within the construction sector. According to the Chartered Institute of Building (CIOB), the industry will need to find 157,000 new recruits by 2021 in order to keep up with demand. While there are measures in place to help correct this imbalance with home grown talent (for example, the government has committed to an additional 3,000,000 apprenticeships across all industries in England by 2020), there is some urgency to find a solution. Migration from EU countries into the UK has already begun to slow as a result of the impending Brexit departure and an increase in construction costs and slowing down of current projects is already being seen due to the existing skills shortage. If that skills shortage is exacerbated then the results could be disastrous.

The views from within the industry

Federation of Master Builders chief executive Brian Berry said, “EU workers are vitally important to the UK construction sector. Nine per cent of our construction workers are from the EU and in London, this increases to one third. These workers have played a very significant role in mitigating the severe skills shortages we have experienced in recent years.” His comments highlight the major worry that is facing construction employers: that the supply of EU workers has helped to ease the issues of skills shortages and if the MAC recommendations are accepted this could leave the industry stranded. Matthew Fell, UK policy director at the Confederation of British Industries, agreed stating that, “plans outlined for low-skilled workers are inadequate, and risk damaging labour shortages.”

Freight Transport Association Head of Skills Sally Gilson also highlighted how the focus on only allowing skilled workers into the country was not necessarily the right approach. She said, “Yes, highly skilled workers are valuable to the economy, but so too are those whose work keeps us able to operate at home and at work, 24 hours a day.”

The recommendations in the report would effectively prevent those who are earning less than £30,000 a year from being able to get a visa to work in the UK. At least, that has been the interpretation so far. Because the reality is that the report has generated a lot more questions than it has answered. Employers and construction sector bodies still have no clear idea of how the migration system would work if based on the MAC recommendations. For example, would those workers who have skills that are in the shortest supply in UK construction right now – such as carpentry and bricklaying – be caught by the policy change if it is put into place? That could be disastrous for the sector, as it would take years to train up home grown talent to fill the gap left behind by workers who are not able to enter the UK industry because they can’t get a visa.

Is there a compromise?

The MAC recommendation to exclude lower skilled workers has been roundly condemned by the construction sector. Many who work within it feel that the research carried out by the MAC failed to take into account the reality of the industry today. The recommendations have also been accused of being misguided in terms of what the true impact would be for the construction sector if it lost a large proportion of its low skilled worker base. One of the main points of contention is that the report states that the existing numbers of EEA workers in the UK would be unlikely to change and that this would reduce the impact of preventing further lower skilled workers from entering the country. I.e. there are already large numbers of unskilled workers in UK construction and they can continue to meet the demand for workers of that level to avoid a crisis occurring. However, as many have pointed out, this doesn’t seem to take into account that there is already a skills shortage in the construction industry today. A more plentiful flow of workers is required, not a total block of supply.

Obviously, some sort of compromise will have to be reached between the government and the industry so that migration rules can be agreed that don’t restrict the economy. Brian Berry has highlighted that the report ignores “the pleas of construction employers who have called on the government to introduce a visa system based on key occupations rather than arbitrary skill levels.” This could perhaps present a viable way forward for the new immigration rules – rather than using the Tier 2 approach of skilled or unskilled, visas could instead be granted on a case by case basis in the context of the occupation of the applicant.

Are there any loopholes?

The MAC recommendations did make an exception for one industry: agriculture. As 99% of seasonal agriculture workers in the UK come from EU countries outside of the UK, a special exception is recommended in the report for that industry. No other sectors are given the same kind of preferential treatment, despite the fact that many also rely heavily on low skilled EU workers. Instead, the report suggests that, where there is low skilled talent required, this could come from young people and the report recommends extending the current young person’s work visa system to accommodate this.

The consequences for the UK

One of the major concerns for construction is that the MAC recommendations come at a time when there is a lot of pressure with respect to UK house building. As Brian Berry said, “For the government to make good on its construction and house building targets, it will need sufficient numbers of labourers as well as civil engineers and quantity surveyors.” These concerns were echoed by Marie-Claude Hemming, director of external affairs at the Civil Engineering Contractors Association (CECA) who said: “if adopted by government, the MAC’s recommendations have the potential to slow down the development of infrastructure across the UK.” There is also a concern that the recommendations could result in a “brain drain,” as people from around the UK are drawn to London and other UK locations that are construction hot spots to fill the gap left by lost EU workers. This could derail government plans to try to rebalance the economy nationally and make it very difficult for local and regional projects around the country to keep up with delivery deadlines and objectives. Everyone across the construction sector is in agreement that nurturing more home grown talent is essential but the MAC recommendations fail to take into account the period of time that will take to achieve.

The recommendations in the MAC report have alarmed many in the industry, as they could deprive the construction sector in the UK of an essential source of crucial labour. Current skills shortages, intense pressure to meet house building targets and the need for a balance of both skilled and unskilled talent make the MAC report recommendations look rather short-sighted and badly informed, at least in a construction context. As industry lobbyists look to prevent the government from accepting the recommendations wholeheartedly, the outlook for construction in post-Brexit Britain currently looks rather uncertain.

At RG Group we understand the importance of advocating on behalf of industry issues. If you’d like to discuss your project requirements get in touch with our team today.

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