From Carillion to Brexit: Out of the Frying Pan into the Fire

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Following the recent UK Construction Purchasing Managers’ Index (PMI) figures, Brendan Sharkey, head of construction and real estate at accountancy firm MHA MacIntyre Hudson, says the industry has emerged from Carillion’s collapse relatively unscathed, but is slow waking up to the Brexit threat.

Today’s figures reflect a sector that’s doing well and it has proved resilient over recent months. The truth is that construction has actually done much better than most people expected following the collapse of Carillion. The carnage among second and third tier construction companies, thought to be an inevitable consequence of Carillion’s demise, has failed to materialise to any real extent, although unfortunately there have been casualties.

Below the top tier outsourcing and construction giants there are many well run firms with decent profit margins, reserves to see them through a crisis, and good relationships with the tier one firms. This should give us some degree of confidence for the future. The sector is stronger and has better management than most commentators have given it credit for.

On a less positive note, construction has been relatively slow to wake up to the dangers posed by Brexit. Given the industry doesn’t depend on exports, the potential pitfalls of a no-deal Brexit have perhaps been easier to overlook. Yet construction does depend on the import of raw materials, and crucially on the free movement of labour. Over the next few months we will see more focus on contingency planning and demand for additional information and support from the government.

The consequences of Carillion’s collapse were over-hyped but only a very foolhardy captain of industry can assume the same will be true about the consequences of a no-deal Brexit.

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