Brexit Blues? It may not be that bad…

Are we at risk of overestimating Brexit concerns?

 

relax-it-s-not-the-end-of-the-world

With The BBC and other news outlets touting today[1] that the service industry is recovering today it is easy to get carried away with a belief that we’re out of the woods with the “post Brexit-Blues” and say that everything is recovering. Indeed the construction industry that forms a good portion of our client base has been an area of particular interest. News outlets only a few months ago were touting that the construction industry was failing to recover after the shock of Brexit but then things changed. Headlines such as “Construction becomes first casualty of Brexit as house builders get jitters”[2] have changed to “It’s not the end of the world’ – A post-Brexit construction industry.”[3]

 

Whilst the construction industry has had some direct impact from Brexit, such as the cost of materials which have to be imported, it is important to not overstate or understate its effect. Jennifer Jones, for example, recently outlined how imported material costs could be managed despite the fall of the value of sterling in an article for Construction News. [4] What is important about this is not the specifics of the article or its advice but what it represents for the construction industry. Whilst it is a tough time for all industries post-Brexit with so much uncertainty about where Britain belongs within the world – it is important to examine things with some neutrality and consider that it may not be all bad or all good.

The service industries’ recovery shows that things can improve, indeed the industry “accounts for about 80% of the UK economy”[5] but the problem comes when we overestimate or radically underestimate the results of the impact. Whilst the BBC article is very positive in general about what the data represents within the article they quote Scott Bowman who has a more balanced view. “Just as the July survey probably overstated the economy’s underlying weakness, the August survey probably overstates its subsequent recovery,”[6] what is interesting about this is that it shows how willing we are to look at trends in terms of extremes.  It seems that there is a massive turnaround but actually we overestimated the initial results and therefore overestimate the change.

The undeniable truth is that construction as an industry is actually far better placed to survive such turmoil than the service industry. Whilst many will swear that their morning coffee from whichever cafe or chain is absolutely essential to their lives (myself included at times!) the irrefutable fact remains that it is a luxury. Housing is not a luxury but actually one of our fundamental needs beyond the basic food and water we need to physically survive. As the provider of housing, construction is better positioned to recover than many other industries as it fulfils something that everyone needs. Construction however, is a service itself, it does rely on other industries to provide the requirement for the building works, someone who pays the bills so naturally they are affected by instability. Overestimating the lack of demand this can cause is not productive though as it neither helps the situation nor our understanding of it. We are still dealing with a housing shortage and therefore we can expect that this is one area of construction which will still be in demand.

Maslow's Hierachy of needs. Safety (in this case housing) is our second most basic set of needs.

Maslow’s Hierachy of needs. Safety (in this case housing) is our second most basic set of needs.

 

Eventually we will know exactly what the full impact of Brexit is but until such a point we must take what we find with a pinch of salt – whether it be good or bad – because it may be misleading. Whilst it is important to improve our understanding and navigate the murky waters ahead looking at the data can if done wrongly it can be more harmful than helpful. Instead we should focus on what can be done to improve the fortunes of each of our business sectors and work towards that rather than celebrating our successes too early or bemoaning the state of things as they are.

[1] http://www.bbc.co.uk/news/business-37274279

[2] https://www.theguardian.com/business/2016/jul/04/construction-first-casualty-brexit-housebuilders-jitters-eu-referendum

[3] http://www.buildingspecifier.com/its-not-the-end-of-the-world-a-post-brexit-construction-industry/

[4] Construction news Issue 7451 – Issued Date: Friday 2 September 2016. Pg47 – 48

[5] http://www.bbc.co.uk/news/business-37274279

[6] http://www.bbc.co.uk/news/business-37274279