The impact of Brexit on UK businesses so far

There is little doubt that the loss of access to the EU labour market has had a substantial effect on many sectors, says Amar Ali

The impact of Brexit on businesses in the UK can be seen far and wide in almost every sector.  Whether you have seen shortages of products on shelves in your local supermarket, had restaurant reservations cancelled due to lack of staffing, or you have had to wait longer for medical treatment due to insufficient medical staff, you will have seen at first hand some of the impacts.  

While not all of these issues are caused by the ending of free movement between the EU and the UK (the Covid-19 pandemic certainly added fuel to the fire), there is little doubt that the loss of access to the EU labour market and the post-Brexit sponsorship management system have had a substantial impact. 

Retailers struggling to keep supply chains going

The shortage of haulage capacity and drivers are causing a crunch within retail, with some in the sector saying that it is on the edge of failure. As a result, wages for lorry drivers have gone through the roof, with some being paid £950 per shift, according to Richard Walker, managing director at Iceland. “That’s around £250,000 a year. Even a junior banker might start to feel tempted,” he added.  

Like the general staffing issues being experienced across the UK, it is not possible to apportion blame on Brexit entirely for the shortage of lorry drivers, but it is certainly a factor. Walker said:, “What we are seeing is not an inevitable consequence of Brexit – far from it – but a self-inflicted wound caused by the government’s failure to appreciate the importance of HGV drivers and the work they do”.  

But as the Financial Times recently reported, an estimated 25,000 EU drivers returned home during the period of the pandemic and following the end of the Brexit transition period. The supply chain issues are really, therefore, a perfect storm of Brexit, Covid-19, and a lack of investment in HGV recruitment in the UK.

While the government has relaxed the rules on the number of hours that lorry drivers can work in the UK to try to alleviate some of the shortages, this is unlikely to resolve the issue fully.

Shortages of staff now acute in the UK

Shortages of staff in some sectors are now acute, especially in the types of roles that lower-skilled EU nationals would have traditionally been free to fill. More than 90,000 EU workers have left the UK’s hospitality sector in the past 12 months. 

According to Tony Goodger of the Association of Independent Meat Suppliers, the issue is so acute that there are now 14,000 vacancies across the UK. The trade body has even recommended that food supplies be prioritised under a scheme that enables prisoners to work on temporary day release.  

In addition, the lowering of the skills threshold from RQF level 6 to RQF level 3 (equivalent to A-Level) post-Brexit under the Skilled Worker visa route is not going to be sufficient to resolve the issues that Goodger raised.  

New research suggests staff shortages will be a long-term issue

New research from the Recruitment and Employment Confederation (REC) suggests that the problems already experienced by UK employers in hiring staff this year is likely to continue for several years due to Covid and Brexit. 

Neil Carberry, the REC’s chief executive, said: “Large numbers of people are finding new work post-pandemic as the economy reshapes. But that realignment will take time, and there is good evidence to suggest that the market will remain tight for some years to come, even if the current crisis passes”.  

The REC’s job checker shows that there are now in the region of 1.7m job vacancies across the UK with demand increasing rather than abating.  

Can UK workers alone fill the lower-skilled job market?

Given that the exodus of EU workers from London was as high as 75 per cent even before the pandemic hit, it is difficult to see how UK workers alone can fill the gap left behind and exacerbated by Covid. Vacancies on job websites, including one that serves the hospitality sector, have grown exponentially (vacancies on caterer.com have grown by 342 per cent with over 28,000 vacancies).  

Another affected sector is agriculture, with many fruits and veg growers unable to find staff, with some resorting to giving their produce away. According to the BBC, York-based raspberry grower Richard Morritt has done exactly this. Morritt told the BBC that pickers traditionally came from Eastern Europe, but in 2020 he relied on furloughed workers and university students; for 2021, however, this was not viable.  

Robert Newbery, East and West Midlands Regional Director for the National Farmers Union (NFU), said: “Brexit is certainly having an impact. The people that could move freely within Europe before now can’t. What we’re looking for going forwards is an expanded seasonal agricultural workers scheme.”  

Responding to the pleas from the sector for an expansion of the seasonal worker scheme, the government stated: “We understand the importance of seasonal labour in supporting a successful and effective agricultural and food sector, and are considering how best to support the needs of the sector by working closely with industry to understand both permanent and seasonal workforce requirements.”

There is no doubt that the dual impacts of Brexit and Covid have overlapped, perhaps masking the true impact of leaving the EU. Nevertheless, the government now has an enormous task on its hands to respond effectively to the many challenges faced by employers as a result.  

It is unlikely that short-term measures such as increasing wages will be enough as doing so will make many businesses financially unviable in the future. Preparing for the future needs of the economy, investing in training, and providing easier access to sponsored workers from overseas will be vital in the coming months and years.

Amar Ali is the managing director at immigration law firm Reiss Edwards