On 23 June the UK will have the opportunity to decide whether Britain should stay in, or leave the European Union. No nation state has ever held a referendum on EU membership, or indeed left the political and economic partnership. Thus no precedent for the impact that an EU exit may have on the economy has been set, leaving around 15% of UK voters currently ‘undecided’
[1]. The main arguments at the centre of the EU debate relate to immigration, sovereignty, trade, security, jobs and finance. Those wishing to leave the EU want to take control of British borders and reduce the number of immigrants coming into the country. They also feel that the EU imposes too much regulation and that Britain is being held back by its membership. The ‘In’ campaigners argue that the flow of migrants helps to fuel our economy and our membership makes trade within the EU, and negotiating deals elsewhere, much easier. The reality is that the real impact of Brexit is unknown. But, what potential impact might a vote to leave have on planning and development?
The majority of the English planning system is intertwined with European law, particularly regarding environmental considerations. The impact on the English planning system would depend on whether a total Brexit was achieved, or the UK retained access to the single market (through the EEA or EFTA) - akin to the Switzerland model. Inside the single market, most EU laws would still apply in the UK, but the ability to influence future EU policy would be limited (even though England would still be bound to adhere to them). Outside of the single market, EU laws and policies would no longer apply.
There are hundreds of EU directives that are transposed into English law on issues ranging from packing waste to the protection of copyright. One of the key directives that impacts on English planning is the Environmental Impact Assessment Directive that is transposed into the Town and Country (EIA) Regulations 2011 (as amended). If the UK opted out of the single market, it would no longer be bound by the obligations that are set out in the EU EIA Directive, although in the short term it would be unlikely that the EIA Regulations in force in England, would be significantly amended. In the event of a total Brexit, the government may come under pressure to dilute the English EIA Regulations to cut red tape and bureaucracy within the planning system - a well-publicised aim of the Coalition and Conservative governments (although it is noted that they have recently been amended). There is however a risk that any further relaxation of the Regulations could result in England falling behind in the protection of people and the environment. Whilst it is easy to identify the cost and time that is associated with proposals for EIA developments, it is less easy to quantify the harm that has been avoided through the thorough assessment of any significant environmental effects by the decision-makers.
Business leaders and senior political figures have expressed concern that Brexit would have significant ramifications for the British economy. The Bank of England has warned that a ‘leave vote’ may increase the risk of a credit crunch and higher interest rates for borrowers:
“Heightened and prolonged uncertainty has the potential to increase the risk premia investors require on a wide range of UK assets, which could lead to a further depreciation of sterling and affect the cost and availability of financing for a broad range of UK borrowers[2]” This could result in developers and housebuilders having problems in drawing down funds to finance development. A knock-on effect would then be felt and this may result in a slow-down within the property market, together with a reduction in the number of planning applications that are submitted.
However, the impact of an EU departure may be felt more keenly in the construction phase of the development process. Access to labour is a key concern for the construction industry, without which it would be incapable of functioning. It has been well-documented that many British developers rely heavily on foreign workers to fill both skilled and unskilled positions. The free movement of people (and goods) is one of the four founding principles of the EU and helps to provide UK construction companies with a vital resource – employees. A vote to leave in June could mean (depending on the stance that the UK government takes on immigration and work visas) that foreign workers would find moving to the UK much tougher. Migrants may choose to work in other EU countries where movement will remain relatively easy, leaving British firms with a staffing crisis and housebuilders with swathes of sites that they are unable to build out due to a lack of workers. The cost of construction may also increase significantly due to the increase in workforce wages that may arise from a supply/demand imbalance of workers, which could push house prices up further.
So, what is the consensus within the industry? A recent poll undertaken by Property Week found that around two thirds of property professionals wanted to remain in the EU
[3]. Simon Rubinsohn (Chief Economist at RICS) appears wary of the impact that an out vote may have on the property markets and has said:
“…untying the UK from arrangements built up over many years and recasting them in new framework may well provide opportunity, but it certainly won’t bring certainty or clarity for some time afterwards.“ The RTPI on the other hand has chosen to say silent on the matter.
If Britain does vote to leave, a withdrawal deal is likely to take at least two years of negotiations to agree. Any UK legislative changes would not be felt for some time after that. NLP’s Planning & EIA Director Nicola Mableson is clear:,
“While EIAs entail a lot of work for major applications, they represent a tiny fraction of developments' capital costs. I suspect EIA is here to stay. It is an effective method to assess the acceptability of these developments. Whether they adopt a different form is a different question.”
The general consensus is that an out vote would affect the British economy in some way and a knock-on effect is likely to be felt by the property industry. Immigration has been a hot topic of debate and the Government may come under pressure to implement changes to the UK’s migration policies sooner rather than later. This would put pressure on the construction industry to ensure that its workforce would remain intact.
Whatever the outcome of the June referendum, NLP will remain at the forefront of planning analysis and keep our clients informed of any potential changes to the UK planning system arising from it, and advise on how best to respond and adapt to changing circumstances.
