Although Boris Johnson’s government has concluded a Brexit withdrawal agreement with the EU, there’s no certainty that this deal will ultimately receive UK parliamentary approval, especially given the General Election on 12 December.
As with all sectors of the Irish economy, the Irish homebuilding industry is vulnerable to the impact of Brexit, given the quantum of raw materials imported from the UK. To ensure no impact to the supply chain, it’s important for Irish homebuilders to prepare for Brexit, particularly a no-deal scenario, which would see the UK default to trading under World Trade Organisation rules.
(1) Firstly, Irish homebuilders should prepare for customs’ arrangements. Many manufacturers based in the UK may require their customers (which could be Irish contractors) to deal with customs’ declarations. These would be required even if a withdrawal agreement is agreed between the EU and the UK government. Activate customers are currently familiarising themselves with customs’ procedures. Firms in the construction industry should register with Revenue for a customs number if they trade with the UK in any way.
(2) Another area that Irish companies need to prepare for is increased regulation on materials being imported. Checks would be required to ensure that materials coming from the UK satisfy EU standards. Delays at ports are inevitable, with increased checks likely to cause logistical issues.
(3) Companies should prepare for an increase in tariffs applied to imported goods from the UK. The estimated increase in costs as a result of tariffs is 3-5% (source: Property Industry Ireland).
(4) At board level, our customers have considered the impact of Brexit across their businesses and supply chains. They have explored the possibility of importing their supplies from other EU countries. It’s possible that smaller UK manufacturers may cease exporting to Ireland, if trading becomes uneconomical.
(5) Stockpiling is visible on some construction sites across Ireland – this obviously frontloads costs and may result in additional storage/security expenditure. It does, however, ensure a consistent supply of raw materials. Savills have reported that warehouses in Dublin are operating at 96% of capacity.
(6) Certain Activate customers have expanded into off-site modular construction as a means of vertical integration. While at an early stage and not yet fully cost effective, this construction method is safer (significantly fewer ‘at height’ hours), produces less waste, leads to indirect savings (prelims, cost of finance, etc.) and ensures a greater degree of control over the supply chain.
(7) Irish listed homebuilders have conducted surveys to Brexit-proof their businesses. Their aim is to identify any potential risk to the supply chain as a result of materials originating or travelling through the UK.
In summary, the means by which the UK will leave the EU is far from certain and Irish homebuilders are putting in place contingency plans for continuity of supply of key raw materials, which should ensure consistent delivery of homes to the Irish market.
Disclaimer: This blog post is for information purposes only. It is not legal or professional advice and should not be treated as such.