Brexit and timber – what’s next?
Brexit and timber – what’s next?
ARTICLE · By Timber Trade Federation · 31 Jan 2020
As the UK officially leaves the EU at 23:00 GMT today, the UK will be free to negotiate and sign new trade deals with countries with no existing EU deals, such as the U.S. What will this mean for the timber and construction industry?
Potential Brexit scenarios
The Construction Products Association (CPA) have provided a Brexit Update on the potential scenarios and implications that could occur during the next negotiation phase, over the next 11 months as Brexit is implemented.
As Boris Johnson’s Brexit deal becomes law, having received royal assent from the Queen after clearing all its stages in parliament, the balance of probabilities between the outcomes of this new phase continues to shift.
The most likely scenario from the CPA is an extension to the implentation period to 2022 causing UK business to be in limbo for at least another year.
The least likely option at this point is a No Deal with only 25% confidence this would occur. This would see both the Sterling and Euro falling to incredibly low levels compared to the two most likely options.
The Free Trade Agreement would be the EU’s most preferred choice, but whether this would satisfy a Parliament and Brexiteers who want to see Britain out of EU rules poses challenges of its own.
No Deal implications – 31 December 2020
While less likely, if a ‘No Deal’ scenario does occur on 31 December 2020, Sterling could potentially depreciate by 15-20%, leading to a rise in import inflation’ energy, warehousing & haulage costs, long delays at ports and great disruption to the UK’s supply chain, impacting trade and cost inflation.
As a result, the largest impacts would be on new orders in 2019 Q4 & activity in 2021, which would see a sharp fall of -4.1% in total construction. On our website we have also provided a TTF Guide to No Deal.
Potential risks for construction
The construction sector is currently facing a global economic slowdown as growth in the EU, US and China have stagnated, which is already affecting UK growth as seen in the 2019 figures.
The persistent uncertainty over Brexit has continued to hinder investment and lending and is projected to get worse under a No Deal.
There are also challenges around access to skilled labour from the EU following Brexit and the potential to use infrastructure as a way to rebalance the economy away from the overheated southeast across England.
Concerns about a skills shortage
The construction industry relies heavily on foreign migrant labour for skilled and non-skilled roles.
It is feared that when we leave the EU the guarantee of freedom of movement could worsen the skills shortage. If immigration is limited, particularly for skilled workers, the UK may witness higher project costs where labour demand outstrips supply.
Recent announcements from Home Secretary Priti Patel for immigration reform included a proposed £30,000 minimum salary threshold for migrant workers after Brexit.
The TTF, as part of the Confederation of Business Industries (CBI), along with the British Chambers of Commerce, Federation of Small Businesses, Institute of Directors and Make UK are engaging with the Government to seek continued access to skilled workers following Brexit.
Importing and exporting timber following Brexit
Currently, the UK benefits from the freedom of movement of people, services and goods within the EU, eliminating duties and other restrictions. The CTI estimate that Europe supplies 87% of all the wood and wood-products imported into the UK. Europe accounts for only 57% of sawn hardwood supplies, with North America (20%), Africa (12%), Asia (9%) and South America (2%) providing the rest.
The UK Government have provided a Trading timber guidance page on what would happen to importers and exporters from the 1 January 2021.
From 1 January 2021, you’ll need to show imports from the EU and European Economic Area (EEA) have been legally harvested. To show you’re importing legally harvested timber, you’ll need to carry out due diligence, please see the due diligence checklist. If you’re exporting timber to the EU or EEA, you may need to supply documentation about the source and legality of your timber.
This is so EU and EEA-based customers can meet the EU Timber Regulation (EUTR) due diligence rules. Due diligence systems will vary business by business.
As all of these graphics indicate, the UK will see another year of uncertainty and risks that will change the face of our economy and society for years to come. No matter what happens after today, the Timber Trade Federation will continue lobbying Government and supporting its members to ensure we get the best Brexit deal for the UK timber industry.
Sign up below for the UK Softwood Conference 2020 on Wednesday 4 March to get greater insight and analysis of Brexit and other major topics that are affecting the timber industries.