NEWS
Uncertainty reigns, but stability leads the way
U
ncertainty is the key word that has been used by every commentator since the UK people voted to leave the EU on 23 June this year. With the economic market shocked, the UK setting the precedent of withdrawal from the EU in its current form and the mountain of negotiations and legal wrangling that will certainly entail, there is no doubt that uncertainty will remain a key word for some time to come.
But stability is on the horizon, kicked off by the Conservative party’s fast selection of a new Prime Minister and Cabinet. The new Chancellor of the Exchequer, Philip Hammond suggested in a recent BBC interview that taking such decisive measures along with a pragmatic approach should help reassure business and stabilise the economy. “A key factor will be how quickly markets adapt to the economic shock of exit,” said Steve Gill of Steve Gill Associates. “The pound has already plunged – it may recover once the initial surprise has passed but a weak pound makes overseas investment in the UK cheaper. However, without access to the single market, it may be less desirable.”
Article 50 (commencing exit negotiations) is the next big milestone which will need to be invoked, and those negotiations can take up to two years. We are therefore, in essence, still a member of the EU – and likely to remain so for a couple of years or so. In addition, it is most likely that transitional provisions will phased in order to realise a controlled exit, maintaining a relatively stable economy. “We can, of course, consider the risks,” said Professor Rudi Klein, chief executive of the Specialist Engineering Contractors’ Group. These
could include: ■ Rising materials costs as the value of the pound falls
■ Further skills shortages if UK-based EU workers decide to leave for home
■ Projects put on hold while the uncertainty continues (this has started to happen)
■ Over the longer-term, a reduction in public expenditure on infrastructure and construction
■ A flattening of the housing market with houses currently in construction being left unsold.
“As a matter of priority,” Professor Klein continued, “I would advise construction firms to closely track plant, equipment and materials prices, fuel prices and labour costs. These will, of course, have to be factored into contracts.”
Environment
The Department for Energy and Climate Change has been folded into the Department for Business as the new Department for Business, Energy and Industrial Strategy led by Greg Clark who said: “I am thrilled to have been appointed to lead this new department charged with delivering a comprehensive industrial strategy, leading government’s relationship with business, furthering our world-class science base, delivering affordable, clean energy and tackling climate change.”
Paul Davies, head of policy at the Institution of Engineering and Technology (IET) said: “The main priority for this new Government department – as well as giving welcome prominence on the need for an industrial strategy – must be to ensure clear lines of responsibility and accountability for
meeting both the UK’s energy needs and fulfilling our industrial and innovation potential as a nation. “Effective policies are the key to solving the challenges of the energy trilemma – decarbonisation, security of supply and affordability, – and to ensuring the manufacturing sector continues to go from strength to strength. UK manufacturing is growing at the fastest rate for a generation, so we must act now to maintain the momentum.”
Skills
Immigration was one of the key contentious issues for the EU Referendum and will continue to be an area where great care must be taken. As an industry we have been talking about the skills shortage for a number of years and exit from the EU could well limit the resources available even further by making it difficult for companies to recruit from other EU member countries.
Naomi Climer, IET president, said: “At a time when we have a huge shortage of engineers, limiting the number of professional engineers that could come and contribute to our economy would affect the industry and the nation’s financial wellbeing.”
“The certification and personnel competence requirements have all been set at UK level,” clarified Graeme Fox, senior mechanical engineer at the Building Engineering Services Association (BESA). “They are all different across the EU; even though we have the mutual recognition status between international schemes. “Despite the Brexit vote, there will be no change to the requirements for legally working with fluorinated greenhouse gases and systems containing them here in the UK. All aspects of the implementation here in the UK are set up by and administered by UK industry or Government department so there is no reason to believe anything will change materially for the contracting side of the industry.
“Time will tell whether or not UK Government decides to take a slightly different path to the rest of the EU in terms of emission reduction targets, phase down pace, competency qualifications and so on, but anything on that would be speculation at this time and it is too soon to begin to look at that.
4 August 2016
www.acr-news.com
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