Brexit & Construction Industry

Why Using an Insurance Broker Is the Best Option: Part 1
August 30, 2019
Message from the Road Safety Authority about Brexit and UK driving licences
September 30, 2019

With its potential to affect everything from labour supply to funding, Brexit is creating uncertainty across the UK construction industry. A recent article by Allianz, which we summarize below, highlights why construction firms must work closely with their brokers and insurers to ensure risk is well managed and appropriate cover is maintained.

Whatever shape Brexit takes, there are likely to be some significant ramifications for the construction sector:

  • Construction firms do employ migrant workers, so restrictions on the movement of people will exacerbate the current labour shortage. Design consultancy Arcadis predicts that a hard Brexit could mean 215,000 fewer EU workers will join the sector.
  • The supply and cost of building materials will be impacted if restrictions are imposed on the movement of goods. With almost two thirds of building materials in the UK imported from the EU, the introduction of tariffs coupled with a potential fall in sterling could see costs escalate and potential for delays due to custom checks.
  • Funding is also likely to be affected, with infrastructure projects in particular feeling the effects of the loss of money from the European Investment Bank. More broadly, the potential for an economic downturn in the UK could dull investors’ appetite for construction projects and see funding being removed from contracts. This was seen in the last recession, when investment dried up and many construction projects were put on hold.
  • It’s important that construction firms speak to their insurance broker, when this happens: this would be considered a material change, which could affect the terms and conditions of their cover. Construction policies usually contain a cessation of work (stoppage of work) clause. This kicks in after work has stopped on a site for a specified number of days (typically 90). This means that if work stops, cover may be suspended at the end of the 90th day.
  • It’s easy to see why insurers use cessation of works clause. Far too frequently, when building works are stopped mid-project, the owners will simply erect a fence around the site and move on to another site. Unfortunately, this leaves the site unprotected and at a much higher risk of theft, arson, escape of water and other damage. If you allow this period of grace to expire without informing your insurance broker and negotiating ongoing cover, you will find that the insurer is entitled to decline a claim.
  • Work with your insurance broker to implement appropriate risk management measures and maintain the right insurance cover in place. Improved security is a common requirement, for example, that the contract site must be protected by fully hoarded fencing to a height of no less than 2.4m with gates and doors appropriately secured. For larger contracts, additional measures may be required, such as manned security guarding and a site wide monitored CCTV system. If Brexit results in an economic downturn, theft of plant, machinery & materials is likely to increase: keeping them secure is essential.
  • Construction firms also need to make sure their workforce follow health and safety practices. If labour turnover increases or firms need to recruit less experienced workers, there’s a higher risk of accidents. Having a robust approach that ensures all workers understand the health and safety procedures will help to keep the site safe.

Keeping your insurance broker informed on any material changes will ensure that the right cover is in place and there are no unpleasant (and expensive) surprises in the event of a loss.

Should you wish to discuss any point raised above or an aspect of your insurance arrangements, please do not hesitate to contact us on 049 433 2944, e-mail or complete our online enquiry form.

Daria Sadkina
Daria Sadkina
Daria has over 15 years of experience in the insurance market, including personal & commercial lines, claims handling, training & development, and legal compliance. She is an Internationally Certified Compliance Professional and regularly assists the Insurance Institute of Ireland on educational projects.

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