Brexit’s New Paradox: How to Build an Economy With Fewer People
Brexit’s New Paradox: How to Build an Economy With Fewer People
(Bloomberg) -- David Ellis took a walk around a half-built skyscraper towering above Birmingham, a British metropolis dotted with the winking red lights of construction site cranes.
As he watched a team of workers installing glass panels, the full implications of the U.K.’s exit from the European Union and its free flow of goods, services and—critically—people, suddenly struck him.
“It really just brought it home,” Ellis, the regional director for BAM Construct UK in charge of the project, recalled later about the subcontractor. “It’s an Italian company with a mostly Romanian workforce being led by a Portuguese site manager—and they’re doing a thoroughly professional job.”
Concern over the supply of such labor cuts to the heart of Prime Minister Boris Johnson’s latest Brexit conundrum: how to deliver big-ticket infrastructure projects in regions that need them most, and yet where people effectively voted to shut the door to many of the workers who make them happen.
Home Secretary Priti Patel is branding the U.K.’s new post-Brexit immigration policy, which was announced on Tuesday, as “a firm and fair” system. It uses a scorecard to make sure most people coming into the country are highly skilled workers. That will also reduce the dependence of industries like construction on what the government calls “cheap labor.”
The problem for someone like Ellis, with a multicultural European workforce, is that 70% of the EU workers currently in the U.K. wouldn’t make the cut under the rules, which will come into force on Jan. 1 2021. “Employers will need to adjust,” the Home Office said.
After years of political sclerosis, a deadlocked parliament and several court rulings, Johnson won a renewed mandate from voters in December’s election to make Brexit a reality. He duly delivered on Jan. 31, with a standstill agreement until next year while he tries to strike a trade deal.
Now, it’s the execution of his goal to return Britain to the vanguard of economic power that faces a whole new set of potentially unreconcilable challenges.
In Birmingham, the U.K.’s second-largest city, Ellis was speaking the day after Johnson rubber-stamped one of Europe’s biggest infrastructure projects this month, the so-called HS2 high-speed rail link connecting with London and, later, Manchester.
Johnson praised the route as a way to connect “left-behind” communities in the north and midlands to the center of wealth in the south. It’s been controversial, with even members of his own Conservatives questioning costs that could rise to more than 100 billion pounds ($129 billion).
The government’s budget, scheduled for March 11, is expected to announce further spending to reward former industrial heartlands where Johnson convinced voters to back his party, some for the first time since before World War II.
But regenerating entire regions takes manpower, and much of Britain’s comes from the bloc it just exited. What’s more, huge developments like multi-billion railway links could drain labor resources from smaller projects in the areas around the big cities that embraced Brexit as a cry for help.
“HS2 is a massive plus,” said John Carlin, Wates Construction Ltd.’s managing director for the midlands. He said he trusted the government to get the immigration system right, though “undoubtedly there is that concern that there’s going to be a strain on numbers,” he said. “We don’t have the domestic workforce to cope with all the growth in the industry.”
One in 10 workers in construction was born outside the U.K. In London, the EU provides around one in three, and the industry has long expressed fears that they’re not recruiting enough young British labor to fill the gap left by a lack of new people coming from Europe.
With the transition agreement between the U.K. and EU set to expire at the end of this year, the clock is ticking, said Rico Wojtulewicz, head of housing and planning policy for the National Federation of Builders.
It takes at least two years to train a skilled builder who then needs another two years of experience on site, said Wojtulewicz, a Birmingham native of Polish origin. “So how you’re going to get that done in 11 months, I have no idea.”
Some companies are turning to more unusual recruiting methods to unlock potential.
Akhtar Khan, 40, is a Brexit supporter, though was in prison for a drugs-related conviction during the years of political turmoil that followed the 2016 referendum. He’s now among the 9,000 or so people working on HS2. While an inmate, Khan trained with Birmingham-based RMF Construction Ltd.
Khan said his entry into the job days after his release from prison last month is partly thanks to Brexit forcing the construction industry to look elsewhere than Europe for its workers.
“I understand that people will get labor from outside but obviously with Brexit happening it’s given them that opportunity—and we’re benefiting from that as well,” he said.
Andrew Lee, 30, plans to join Khan. He’s training with RMF to work as a builder once he’s released from prison. “I’ll probably be working on HS2 for the most part of my life,” he said by telephone.
Birmingham’s city center is already swathed with promotions for jobs and opportunities that the new railway link will bring, although trains might not run until the next decade.
The transition away from European workers may prove more of a challenge in parts of the country with where fewer people are looking for work, said Adam Marshall, director general of the British Chambers of Commerce.
In these regions, “businesses say, ‘look I would hire anyone who was ready to work and I’ll train them, I simply can’t get people through the door’,” Marshall said. These firms need “skills at all levels” as well as what the government calls the “brightest and best,” he said.
As work on HS2 edges further north, the next major stop after Birmingham will be Manchester, which is already seeing a frenzy of building activity in other areas. Neil Conlon, business development manager for Conlon Construction Ltd, which is building schools and restoring heritage sites in the city, reckoned there were at least 40 tower cranes up at the moment.
The city that defined the Industrial Revolution during Britain’s heyday has swelled in size over recent decades, though was ranked one of the most deprived local authorities in Britain in 2015, with one in three children living in poverty. These are the areas that Johnson has promised to remember after being left behind.
Refurbishing a Manchester primary school, two workers at least were relishing Britain’s new era.
Bulgarian engineer Stoyan Ivanov, 35, said there’s no question he would choose anywhere else in Europe to live, even if Brexit does take a toll on the economy. “Basically I feel better here,” he said by telephone.
Victor Chiranu, 37, his colleague from Romania, said he already has his permission to live indefinitely in the U.K. “I can stay forever,” he said. “And I’m quite satisfied with this.”
To contact the editor responsible for this story: Rodney Jefferson at r.jefferson@bloomberg.net
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