Brexit brings little threat to U.S. construction costs

July 28, 2016 Laura McDaniel

With respect to the United Kingdom’s coming separation from the European Union (Brexit), many are naturally wondering what the implications will be on the U.S. construction industry. Will the industry be impacted in the short-term or long-term? How will it affect materials and labor costs? What about construction financing?

The short answer – and good news – is there should be little to no impact.

While the referendum result sparked a short-lived downturn in stock markets, they have nearly completely recovered. Meanwhile, liquidity in the credit markets is looking good, and the economic impact on U.S. construction costs should be minor. In fact, with respect to currency markets, the value of the dollar has actually increased, which should reduce the relative price of imported building materials.

On the labor side, since Brexit should have very little impact on the U.S. macro-economy, there should be virtually no impact on the U.S. construction labor markets.

As for construction financing, although there may have been some tightening of standards that occurred in the two weeks or so immediately following the Brexit vote, current movement in loan standards/debt spreads has already dissipated as financial markets recover and volatility recedes.

Unsurprisingly, there may be some element of heightened domestic political uncertainty at the present time in the U.S., but a quarter or two from now (and two to three years down the road), it’s very doubtful that anyone will point to Brexit as an important factor in how construction costs evolved in recent months/quarters.

To see more construction trends, read our latest Construction Perspective.

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