Brexit's impending impact on the UK's construction sector

September 2019

The UK construction sector is heavily dependent on the EU for everything from labour supply to funding. That funding could dry up, either due to the withdrawal of EU money or as a result of an economic downturn, and Brexit is definitely a major headache for the construction firms.

Any restrictions on trade or the movement of people could hit the construction sector hard; it could significantly exacerbate the labour shortage. Likewise, the possibility of tariffs and delays due to custom checks is causing concern.

Given the increased risk of a construction projecting being mothballed, clients should be aware of the cessation of works clause.  This kicks in after work has stopped on a site for a specified number of days, typically 90.  It means that, if work stops, cover may be suspended at the end of the ninetieth day, the mothballed site is at a much higher risk of perils such as theft, arson and escape of water.  As a result we draw clients’ attention to the importance of contacting us as soon as they’re aware that a project may be pulled, as this can help avoid cover being withdrawn.

By working with the insurer, we can advise a client on the measures required to keep cover in force.  Improved security is a common requirement but it may also be necessary to amend policy terms to reflect the change in risk.

The risk of a squeeze on the supply chain has meant that many firms are stockpiling materials ahead of Brexit. This may be prudent but it may be necessary to increase cover limits to reflect this.