Brexit, Carillion and Grenfell legacy create uncertainty on UK estates

AUDE report highlights rise in building costs from weakening of sterling after Brexit vote, plus potential loss of EU construction workers

October 10, 2018
Question marks

The threat that Brexit could cause a rise in building costs, the collapse of construction firm Carillion and the potential legacy of the Grenfell Tower tragedy for cladding requirements are among the factors adding up to an uncertain outlook for UK universities on their estates.

The Association of University Directors of Estates (AUDE) looks at those factors in its 2018 report, published on 11 October.

“We are working at a time of real uncertainty,” writes Keith Lilley, chair of AUDE and director of estates, facilities management and IT at the University of Sheffield, in his report summary.

“We can’t yet foresee the full impact of Brexit on HE – in many areas from the cost of imported materials and components, to student and staff recruitment, to research income. The implications for universities of Grenfell and its aftermath will continue to play out for years to come; while the collapse of Carillion has led many across the sector to question both new and existing outsourced contracts.”

Tougher rules on cladding post-Grenfell could mean that universities will face significant costs in upgrading affected buildings.

Mr Lilley writes that “a groundswell of opinion appears to be pointing towards a more proscriptive ban on flammable cladding materials, but government direction is still awaited”.

On Brexit, the main report says that uncertainties “include the potential for increases in construction costs – partly after the collapse of Carillion and partly through a weakening Sterling making imports more expensive; and both the threat and reality of restrictions on immigration”.

Jane White, AUDE’s executive director, said that the ability of construction companies to recruit European Union nationals after Brexit was one factor. “There’s an impact on workforce – from a staffing perspective of the companies we are contracting with and procuring with – and there’s also the issue of costs of materials, which are rising,” she added.

Although “there has been a very slight dip” in the number of EU nationals coming to the UK to work in construction thus far, the fact that “we’re anticipating potential problems” in the post-Brexit future was the key issue, Ms White said.

She said that not only is the weakening of sterling since the Brexit vote a factor in increased costs of materials, but there is a potential future issue of “the [increased] cost of moving goods around [across] different tax [regimes] and trade barriers; by the time we receive the materials the actual purchasing cost could go up”.

Ms White also said that it had been “a really difficult period for several universities” that had “contracts and work in operation with Carillion”.

Although those universities would have “fallback plans and insurance”, the “impact of delaying” the opening of buildings was the issue, she added.

Ms White said that AUDE aims to promote understanding of “the importance and the value of investing in the university estate, to make sure it’s an attractive proposition – not forgetting that universities all over the world are also investing in their estate. UK higher education is clearly world-leading. We need to stay that way because it’s going to be an increasingly competitive market.”

The report says that “across the sector there is a sustained level of capital expenditure which continued to exceed £3 billion in the year 2016-17”.

It adds: “We are aware that several institutions are undertaking ‘spend to save’ investment, in terms of operational expenditure or considering rationalisation via demolition or disposal. We would expect capital investment to continue to be more uneven across the sector as student numbers change nationally and at institutions individually.”

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