A tale of two Brexits

Two years on from the referendum, the UK construction industry is facing one of its toughest challenges. However, just across the Irish Sea, business is booming; Irish construction firms are capitalising on exchange rates and cheaper materials to push the industry to new heights.

According to analysis by Fexco Corporate Payments, Irish construction firms have more than tripled their spending on imports from the UK compared to pre-referendum levels. Analysis of more than 2,100 transactions made through Fexco, shows that by the end of May this year Irish building firms had spent 240% more on UK goods and services than they did in the first five months of 2016.

The figures also reveal that Irish construction firms are importing more – and more frequently – from the UK. The number of transactions rose by 22% between 2016 and 2018, and the average transaction size has nearly trebled from €5,729 in the first five months of 2016 to €15,211 in the first five months of 2018.

The primary driver behind the increase in imports is likely to be Irish builders’ desire to capitalise on the weak Pound. While cost pressures closer to home are also likely to be a key factor too. A global study published by Turner & Townsend found that Dublin is now the sixth most expensive city in the world for builders. The study predictsthat a shortage of skilled labour would drive up construction costs in the Irish capital by a further 7% during 2018 – a rate of inflation more than double that being seen in London, where Brexit uncertainty has had a severe chilling effect.

David Lamb, head of dealing at FEXCO Corporate Payments, explained: “Two years on from the UK’s decision to leave the EU, the construction industry in Britain and Ireland is living a ‘Tale of Two Brexits’.

“Uncertainty over the impact of Brexit on the UK economy has slammed the brakes on Britain’s construction sector, with output falling sharply in 2018. Meanwhile in Ireland the boom times continue to roll, with Irish building firms cashing in on sterling’s weakness by snapping up imports from the UK.

“Yet this tactic is likely to be about more than just opportunism. British goods and services are cheaper for Irish builders than they were this time last year – and a bargain compared to their pre-referendum levels – but switching to an import-led procurement strategy is also a way to offset rising cost pressures at home.

“With booming demand and a shortage of skilled workers driving up construction sector wage bills, many Irish builders are trying to insulate themselves from an overheating market by importing more of the materials they need.

“It’s a smart strategy, but with the Pound still subject to a high degree of volatility as the UK counts down the months to Brexit proper, Irish builders who import regularly from Britain should consider locking in the current favourable exchange rate by using a forward contract.”

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