What does the Brexit deal mean for our sector?

Ahead of the end of the transition period following the UK’s exit from the EU, a deal was agreed on 24 December 2020 which defines the future relationship.

The UK voted to leave the EU in 2016, and, officially, membership ended on 31 January 2020. However, as a result of an agreement for a transition period to allow a trade deal to be discussed, very little changed before 31 December 2020.

In the months following the vote to leave the EU, SFHA carried out a large research project with members to map the possible long-term impacts of Brexit on housing associations where we identified a number of key issues.

In a follow-up to our 2016 research, SFHA again asked its members in early 2019 about areas of concern and perceived opportunities. Private sector investment and labour costs remained the major concerns for Scotland’s social housing sector post-Brexit. Respondents also raised concerns about long-term economic uncertainty having a detrimental impact on growth, inflation, interest rates, business confidence and lenders’ attitude to risk.

Another significant concern related to reductions in immigration from the EU which members believed could see a shortage of care and support staff in particular, with over 10% of the current workforce being EEA nationals. There are existing staff shortages in sectors such as construction and care.

Although questions remain unanswered regarding the medium and longer-term implications of the UK’s EU exit, the agreed deal offers some certainty in terms of the main concerns of the social housing sector.

The UK is now outside the EU Single Market and Customs Union; however, zero tariffs and quotas have been agreed as part of the deal.

Construction

The construction sector relies heavily on materials and labour from the EU. Around a quarter of all materials manufactured and used in the UK come from overseas, with 60% of those coming from Europe, according to the Construction Products Association.

However, the Construction Leadership Council’s Brexit working group has stated: “the agreements reached will enable construction companies to continue to reliably forecast the cost and availability of products and materials imported from the EU or comprising components made in the EU. The mutual co-operation in respect of reducing technical trade barriers and co-operation at the border will also undoubtedly help to avoid some of the risks of delay and disruption.”

Staff

If your association employs any EU, EEA or Swiss citizens who were resident in the UK on, or before, 31 December 2020, they should apply to the EU Settlement Scheme. Applications are free, and the deadline for applying is 30 June 2021.

These citizens can use an online service to view their immigration status and to prove their status to others such as employers. However, employers and landlords can continue to accept EU citizens’ passports and identity cards as evidence of their immigration status until 30 June 2021.

Guidance for employers is available on carrying out right to work checks on EU citizens and their family members in the UK.

In terms of any future recruitment, the UK has now implemented a points-based immigration system that treats EU and non-EU citizens equally. Anyone you want to hire from outside the UK, excluding Irish citizens, will need to apply for permission in advance.

You now need a sponsor licence to hire most eligible employees from outside the UK. Before applying to be a sponsor you should check that the people you want to hire will meet the requirements for coming to the UK for work.

Under the points-based immigration system, anyone coming to the UK for work must meet a specific set of requirements for which they will score points. Visas are then awarded to those who gain enough points.

This represents a significant change for employers recruiting from outside the UK, and further details can be found here.

Finance and the economy

It is impossible to be certain about the impact on the economy, particularly as we are also in the midst of a global pandemic.

In terms of economic predictions, Scottish Government modelling estimates Scotland’s GDP could be around 6.1% lower (£9 billion in 2016 cash terms) by 2030 compared to EU membership. The UK’s Office for Budget Responsibility estimates (November 2020) a trade deal with the EU would mean the UK’s GDP would be 4% lower in the long run, compared with remaining in the EU.

In terms of what features in the new agreement, a number of partial and temporary equivalence decisions regarding financial services are in place. Lobby group, TheCityUK, has said that while there are agreements covering basic banking transactions, there are up to 40 treaties affecting cross-border activities for the financial industry that need to be renegotiated. Reports suggest an agreement on equivalence may not come until spring or summer 2021.

SFHA will continue to engage with the finance sector and is due to meet UK Finance in the coming weeks. In the meantime, lenders continue to express the view there is healthy appetite for investment in the social housing sector in Scotland.

Internal Market/Devolution

In the final months of 2020, SFHA and our colleagues at our sister organisation in Wales, Community Housing Cymru, has been engaging with member of the House of Lords in an attempt to influence the Internal Market Bill.

An often overlooked effect of Brexit on the sector is the impact on the devolution of powers to the home nations.

While the UK was part of the single market, Brussels was responsible for setting regulations and standards across the EU. Now that the UK has left the EU, Westminster is planning a joint market among the four nations of the UK through the Internal Market Bill.

Concerns have been raised around what impact the bill could have on housing in both Scotland and Wales due to the draft bill stating devolved nations will have to accept goods and services from all parts of the UK, even if they have set different standards locally.

It remains unclear what impact this will have on building regulations and whether this means developers will be able to build new homes in one nation based on the environmental and safety standards of another. Going forward, this could become especially important as the devolved nations set different decarbonisation targets.

Member experiences

SFHA will ensure members are kept up-to-date on Brexit. If any SFHA members do experience any issues as a result of Brexit, please share them with us, and we will continue to feed them into our discussions with government. It would be particularly helpful if you could be as specific as possible about the nature and impact of any problems as that will help with considerations on how any issues might be resolved. Please contact me at smitchell@sfha.co.uk