Brexit: Be careful what you vote for

Antony Smith senior partner at Beale&Co looks at the legal implications for the UK leaving the EU and what the impact will be on construction.

This article will look at two areas:

1.the legal implications of withdrawing from the EU; and

2.the potential impacts on the construction industry of withdrawing from the EU.

So starting with the law and let us assume there is a ‘No’ vote.  What happens?

The process of withdrawal is set out in Article 50 of the Treaty of the European Union.  The UK must give two year’s notice of its intention to exit.  During that two year period the UK and the EU will negotiate the terms of their future relationship.  It is fascinating that none of the politicians are looking as far ahead but just talk in terms of sovereignty and the borders.  Perhaps the reason for that is that when you look at the choices available to the UK they won’t satisfy many of the ‘No’ voters.  So what are the choices?

The first option is a European Economic Area – an EEA.  This is the arrangement that Norway, Lichtenstein and Iceland have chosen.  The UK would remain bound by much of the EU law on employment and competition so the free movement laws would still apply.  We would probably pay less to the EU budget but we would still make a significant contribution in order to be able to continue trading. 

On the downside we would no longer have any direct influence on European legislation as we would no longer send representatives to the European Parliament and the government could not send representatives to the European Commission.  So you can see why the ‘No’ campaign would not want us to enter in to an EEA as we would still have to abide by EU law; have freedom of movement and still contribute to the EU.

The second option is to join a European Free Trade Association but be outside the European Economic Area.  This is the model that Switzerland has adopted.  This would enable the UK to enter a Bilateral Trade Agreement with the EU.  The UK would not be bound by EU legislation but would have to allow freedom of movement.

The other options are a Customs Union like Turkey has adopted.  This would allow us to trade in goods on favourable terms but not services without Customs Duties.  We could enter a Free Trade Agreement with the EU but commentators believe that the EU would not agree such a deal without freedom of movement for workers.  The final option is a World Trade Organisation relationship only. 

We would leave the EU but trade with them on the same basis as the US and China do now.  This is the opposite end of the spectrum to the EEA and we would not be subject to EU laws; we would have complete control of our borders but we would have to negotiate a Trade Agreement. 

 Clearly countries like Germany and France like to trade with the UK and we are an important export market for them so we probably could negotiate that trade deal.  

We should not forget this in that we export 50% of our total exports to Europe.

So you can see that although the Referendum will be on an ‘In/Out’ vote – an ‘Out’ vote will mean a number of options arise right through from an EEA which is very similar to being members to cutting ourselves off completely from EU influence.  There is a view that some recent entrants to the leave team believe that we should have more than one Referendum.  In other words we vote ‘No’ initially in order to use this as a negotiating weapon against the EU and then negotiate better terms with a further Referendum where hopefully the country will agree to stay in the EU.  Very dangerous politically and you can see how that could easily backfire.  Nevertheless that’s all months away and we have to wait and see what the country decides.  

The impact of a no vote on construction?

Against that background it is impossible to be able to predict the impact of a ‘No’ vote on construction.  

What we can do is look at the benefits of the current system that could be lost/reduced if the country votes ‘No’.  I would emphasise that these are my personal views and are very much crystal ball gazing as far as I am concerned.  The main points I can foresee coming important are as follows:


At the moment we apply the EU Procurement Directives meaning that we are part of the club and can bid for OGA EU work.  If we join an EEA that is likely to be the same but if we don’t then we will not have the same benefits as our competitors when bidding for OGA work.  It will mean however that the government could subsidise domestic projects here without being sued for unfair competition by others in Europe.

Environmental Law

This could also be affected.  We have implemented a series of EU directives on environmental issues.  Although we don’t like some of the targets that are imposed on us with regard to bathing waters, habitats, birds and the like they benefit the environment.  Large parts of the UK law on waste are derived from the EU particularly on landfill waste and recycling.  If we leave the EU what will happen to our environmental laws?  

At the moment we have brought them into being through statutory instruments in acting the EU directives.  Can you imagine the political battles that will take place if all of a sudden those EU directives are no longer in force and we have to write our own legislation.  All of these political battles will come to the fore in the two years of renegotiation that will happen in the two year notice period.

Freedom of Movement

We are all very well aware of the skill shortage in this country.  This means that many consultancies depend on engineers and architects from other EU countries.  I am sure if we do leave then we would end up with some form of quota arrangements similar to Australia.   We will want to welcome with open arms engineers, doctors, dentists etc but will they want to come to such a closed country if we have stopped or greatly restricted the free movement of labour.

Euro Codes

These are now part of our heritage.  Will we go back to the old British Standards?  Will be as welcome on the Euro Code drafting committees?  This means that we could lose influence on the future for Standards of design.

Health & Safety Legislation

We will be free of European influence – no more red tape – yippee but will our Standards be acceptable when doing business in Europe? 

All these questions and many others won’t be answered until the two year period of negotiation that follows a ‘No’ vote will happen so we will be entering a very long period of uncertainty for our businesses.  

It is well known that the markets react badly to uncertainty.  We not only have the four month period leading up to 23 June to cope with but we could have a two year period where there is lots of political wrangling over the terms of renewed membership or some form of trading agreement outside the EU.  

We could also have a lot of domestic wrangling about our legislation.  During this period one could anticipate poor economic conditions.  The CBI predicts a 4 – 5% drop in GBP if we vote ‘No’.  Others are more pessimistic as to the impact on GBP.  Not good news for our businesses.  

My personal view is that any business which trades outside the UK must want to stay in the European Union so that it can continue to trade in a settled and regulated market that it knows well.

For those businesses who are smaller and only operate in the UK the benefits are the freedom of movement of labour which helps with the skill shortage.  Also if everybody begins to look inwardly as trading is less favourable in Europe then there will be much greater competition for the domestic business!  

So there you have it my campaign for the vote ‘In’ is actually for the benefit of the whole construction industry.



This is an unbalanced opinion with no confidence in the UK's ability that does not fully explore all the possible and complex options. An independent UK does not have to follow any of the template trading arrangements set out in the article. It can negotiate a deal which is best for both the UK and incidentally the EU. The UK is currently the second biggest economy in the EU and has a population far closer to the new EU than Norway, Iceland and Switzerland. While trade with EU countries is a larger, but reducing, proportion of UK trade than the EU's to the UK the value of EU trade to the UK far exceeds that in the reverse direction. The EU in many quarters is an ailing economy (why are so many people coming to the UK for work if this is not the case)and needs as a minimum to maintain the current situation not make it worse. This can only be done by coming to a balanced agreement. There is no issue about the Eurocodes. We can continue to use them and I am sure that we will be in a position to negotiate their content as anyone trading in the UK will need to comply with our codes so there is sense in keeping them aligned for both sides. The development of ISO codes will continue and eventually supersede Eurocodes as the whole world, rather than one part of the planet, agrees a common standard. The most exciting thing about leaving is that we can develop relationships with parts of the world that are forging ahead rather than be tied to a sick man. If the UK leaves there will be a drive for some other EU countries to follow suit once they realise the benefit to the UK of a leaner commercial world, shed of the shackles of an expensive, and in many cases necessary, centralised bureaucracy, and the greater opportunities for our engineering and construction companies as their efficiency grows. We of course will be able to take our pick of the best engineers, scientists and managers from around the world without any unnecessary and costly baggage to further improve our performance. In the meantime the release the financial resources will enable us to enhance our education system to develop our home grown talent. Leaving the EU will have its problems but far greater opportunities and benefits are to be gained. Finally the EU parliament is not a democracy and we, and some other countries, do not get fair representation which is demonstrated by the fact London, with a population of 8.6 million and a vibrant economy, only has 8 MEPs compared to Malta, with a population of 430,000, has 6 MEPs. Do the mathematics. It is time to leave and engage with the world as a vibrant confident substantial country
I thought the article was fairly non partisan, leaning not towards remaining in the EU but perhaps slightly againt leaving. I think the idea we have a real single market is somewhat fallacious. I work for a large international consultancy and the only way we get work from EU nations is by buying their companies, though EU contractors are getting a lot of business here. Another case of the UK being open to EU trade but but finding EU markets are generally a closed shop. The single market really only applies to goods, which is great for Germany but since most of our strength is in services its not so beneficial for us. Its the same story in insurance, same EU laws but different local conditions and definitions: makes selling products across the EU nearly impossible. And we should remember that although 50% of our exports are to the EU that is still less than they sell to us. Interestingly we haven't run a surplus against the EU bloc since we joined in the 1970s. Leaving the EU is hardly likely to make our deficit worse. Finally and we need to remember this, the EU is NOT an economic project, although we like to pretend it is. The economics is a vehicle, and always has been, for a social & political adventure. Continental Europe has a different history and mindset to us. Yes we are European but not in the same sense. European history has been greatly attenuated by our geographical remoteness and our other overseas interests. We do not understand this context or feel it's power. We were never dominated by the Soviets. Our cities never occupied by the Nazis. Our towns never suffered the secular terrors of revolutionary France. Fascism never gained power in our parliament. Our churches did not partake in the wars of religion. Our borders have remained constant for nearly a 1000 years. Communism was never a serious political force here, we were never threatened with invasion by the Mongols, half our nation wasn't conquered by the Moore's and Napoleonic law never had jurisdiction here. This is a distinctly different context to us. We gave not experienced those fears and realities. We've had a stability others longed for and an international influence the EU deeply desires. This is not our history, nor our aspirations but they are, of these on the continent. We should remember this in the debate.
Considering the steaming pile that is eurocode 7 I'm looking forward to ignoring it for the rest of my career