Long reads

What's next for Brexit?

29 Mar 2018 By Jo Faragher

While Westminster is at loggerheads over the UK’s exit from the EU, People Management arms you with the facts on what could happen next (and why)

When something earth-shattering takes place, the biggest aftershocks are always felt furthest from the centre of power. So it has proved with Britain’s decision to leave the EU. Whether you believe Jersey Royal potatoes will be left rotting in the fields because no one will be there to pick them or view Brexit as a golden opportunity, there’s little doubt that the intricate and complex disentangling of Britain’s relationship with Europe is causing the most serious issues for regular employers and their staff (and, in particular, the EU citizens among them).  

When even the British Chambers of Commerce is urging that employers need clarity so they can plan ahead, the implications are clear. “Even among the many optimistic, future-oriented firms – those that see opportunity in change – patience is wearing thin,” it said in a recent statement. “Directly affected companies are poised to activate contingency plans. Many others, worryingly, have simply disengaged.”

It is nigh-on impossible to keep up with precisely where the government stands and how that might affect future immigration policy, given the constantly shifting nature of negotiations. Political wrangling between cabinet members with differing ideas over the severity of the departure only serves to further complicate the picture. 

Should employers prepare for a hard Brexit where there are tight restrictions on access to the UK for EU migrants, or will it be business as usual, with a bit more paperwork? James Stewart, head of Brexit at consulting company KPMG, says we are “almost at the point of maximum uncertainty – people are starting to worry because they don’t know where they’re going to be”. 

People Management might not be able to give Brexit the full crystal ball treatment, but here’s the lowdown on what you can do now to prepare for March 2019 and beyond. 

Where are we now?

On 19 March, the government agreed with EU negotiators that EU migrants arriving during the transition period (currently proposed to last until 31 December 2020) will gain the same rights to settle in the UK as those who arrive before Brexit. What happens beyond the transition period is still subject to a raft of negotiations wrapped up with the future situation regarding trade deals and the customs union.

Liberal Democrat MP Tom Brake, who heads up the party’s Brexit strategy, argues that this may not offer EU workers the long-term reassurance they crave: “There is no certainty given to EU citizens beyond December 2020, so it’s likely that we’ll see a drop-off in people planning to come here. They may already be making plans to go to other EU countries to work.”  

When will we know more? 

Autumn will be a crucial time for establishing the likely limitations and legal implications of Brexit. The EU has said it wants a withdrawal agreement in place by October this year, so there is sufficient time for it to be approved and ratified. Another thing to look out for will be the Migration Advisory Committee’s recommendations to the government, which are also due by September. 

The government will then publish a white paper on immigration by the end of the year. “There will be more certainty in the autumn,” says Jonathan Beech, managing director of immigration consultancy Migrate UK. “If you know someone qualifies to stay in the UK now, just apply for a residence permit. Apply while the rules are the same as they have been for pretty much the last 20 years, and they could be protected from the free-for-all that could happen next year.”

Beech is talking about the recent findings of the House of Commons home affairs committee, which claimed that the UK’s immigration system will not be ready to deal with the volume of applications it could be handling after 29 March 2019. He adds: “We already know that the Home Office is struggling  with resources – we could be looking at more than two million people all trying to apply for some type of status during the transition period. Those people will also be without passports during that time, so won’t be available for business travel.”

What are the likely scenarios? 

Most commentators agree that there are three broad potential scenarios for the UK’s relations with the other 27 EU countries post-Brexit:

  • Similar to Norway’s relationship with the EU: The UK is still a member of the single market so can trade relatively smoothly, and its citizens are granted 
freedom of movement within the member states. Under 
this model, UK workers would be unlikely to need a visa to work in EU countries and vice versa.
  • More like Canada’s relationship with the EU: The UK is outside the single market but with reductions on goods tariffs. This scenario does not include freedom of movement, but a post-Brexit visa system for EU citizens coming to work in the UK could be an extension of the current one for non-EU migrants, where there is a salary threshold and preference given to certain shortage occupations. Another option is a ‘points based’ system applied to all migrant workers, similar to Australia – again, this would mean that certain sectors would have greater access than others to EU workers.
  • No deal: The UK builds unilateral relationships with EU states based on World Trade Organization terms. In theory, this means no freedom of movement for either UK workers looking to work in the EU, or EU workers coming here.

According to reports on the government impact assessment that MPs were invited to see in February (under strict conditions: they had to hand in phones to prevent them taking pictures) Britain’s economy is likely to be worse off under any of these scenarios. 

The CIPD’s recent Labour Market Outlook, meanwhile, found that the majority (54 per cent) of employers would prefer a system where free movement of labour is retained, while just 29 per cent favoured restrictions on EU workers coming to the UK. Those that already employed EU nationals were more likely to favour free movement, it found. 

While prime minister Theresa May has now given some indication that EU workers will be able to remain if they arrive during the transition period, businesses’ views on future migration requirements are already clouded by issues with the current system for non-EU workers. During the three months to the end of February 2018, the cap for skilled migrant tier 2 visas was hit every month, putting pressure on employers such as the NHS to turn away much-needed skills because visas could not be granted. 

Alex Wrethman, managing director of restaurant chain Charlotte’s Group, says the system of operating a salary threshold and nominating certain jobs as ‘skills shortage’ occupations means he is missing out on talent. “They could realistically assess each sector and then set salary rates and level of experience – something similar to the resident labour market test,” he says. “The restaurant industry is now the third biggest employer in the UK and we need people more than ever. Criteria for sponsorship is difficult and we’re no longer a designated shortage sector.” 

However, Ben Willmott, head of public policy at the CIPD, adds: “There’s a significant weight of opinion among employers that they don’t want complex, sector-oriented systems post-Brexit. They want a national approach based on skills-shortage occupations. 

“Another concern is the restricted amount of time EU workers might be able to stay here under a visa. Many employ EU nationals for two to three-year periods, so this could be restrictive. From the migrants’ perspective, it creates uncertainty – they make a commitment to working for an organisation for a length of time. We could lose talent; relative to the UK, it will be easier to move around the rest of the EU.”

What can employers do now? 

A survey last summer of senior executives across 2,500 European businesses by FTI Consulting found that 83 per cent of companies had a dedicated Brexit response structure, such as a taskforce or team. Matthew Solon, managing director for FTI’s strategic communications practice, says the worst thing employers can do is under-communicate. “Even if you don’t have clarity now, it’s about going back to your workforce and saying ‘we don’t know’. If there’s a development in the news, send an email explaining that you’re looking into options.”

Construction consultancy Arcadis could feel the impact of Brexit keenly if major infrastructure projects are delayed because of skills shortages in the sector. According to the Construction Industry Training Board, around 45 per cent of the UK’s 270,653 migrant construction workers are from EU countries. “Brexit doesn’t affect our employee demographic that much – our profile’s not that vulnerable,” says James Bryce, head of strategic workforce planning at Arcadis. “But it is absolutely relevant to our pipeline of work – if our clients feel the impact of skills shortages, our consultancy will suffer.”

To mitigate this, the firm is looking at workforce planning and utilisation on several fronts. It has built an internal LinkedIn-style database that Bryce describes as a “global taxonomy of the skills we have across the organisation”, complete with technology that can match skills to projects or new roles. It has also worked at reducing attrition, which has dropped from more than 17 per cent to 14.6 per cent, and moving staff internally rather than defaulting to recruit new people. 

“Multi-skilling is important,” adds Bryce. “It means we can respond to clients’ needs faster. We’ve also got our eye on potential areas for automation so we can redirect our human labour force to dealing with customers directly.” These actions will also boost its resilience in decades to come, he adds: “If we don’t see Brexit as the catalyst to make these changes, we’ll get caught napping.” 

Other organisations are looking at Brexit as a business opportunity. Sally Preston, who runs baby food company Kiddylicious, says UK firms are liable to “talk themselves into a depression” by focusing on the downsides rather than the potential opportunities. She was a delegate on the recent trade expedition to China with Theresa May, and has ambitious expansion plans in Asia. “Brexit is a bit like the millennium bug – things are not going to come to a sudden standstill. There will still be deals to be done,” she says. “Rather than getting our knickers in a twist, we should be looking to work with markets where their arms are wide open.”

The CIPD has produced a Brexit guide to workforce planning with the Institute for Employment Studies. It lists ways employers can address concerns about access to skills, including:  

  • Building rather than buying (for example, investing in apprenticeships).
  • Rotating people around the business (both across and upwards).
  • Restructuring work or redefining roles (such as lowering barriers to entry for some positions).
  • Improving their employee value proposition to increase attraction and retention.
  • Using agency workers or flexible contracts. 
  • Finding new sources of labour such as ex-offenders or ex-military.
  • Outsourcing.
  • Joint collaborations such as partnering with another employer for recruitment.
  • Automation. 
  • Moving some operations to somewhere where access to skills is less of an issue. 

But Willmott believes that too many employers are still “sitting on their hands” because of the uncertainty. “There’s a real need in this climate for businesses to understand their workforce skills profile and where the gaps are so they can improve development and retain people. Better data is a good starting point.” 

This is reflected in the Labour Market Outlook statistics: the proportion of employers that said they wanted to continue recruiting EU nationals where possible after Brexit (27 per cent) was far higher than the 13 per cent that said they would recruit more apprentices, or the 8 per cent who would target school-leavers.

Will skills shortages get worse? 

The predicted impact of Brexit on employers varies hugely depending on the sector, with some already seeing issues. A survey of 80 NHS trusts found that 18 per cent had been forced to change their hiring plans because of Brexit, while it’s been predicted that the hospitality industry will face a shortfall of 60,000 workers a year. In technology, a survey by Hired found that the UK had dropped from number one to number six in a list of places tech experts would most like to work outside the US. 

“We haven’t suffered the same mass exodus that sectors with lower-paid workers have, but there is anecdotal evidence that it’s taking more time for applicants to accept job offers and they’re more hesitant and likely to bargain for a higher salary,” says Giles Derrington, head of policy for Brexit, international and economics at lobbying group techUK. 

“Bigger companies can deal with this, but smaller ones can’t compete on salary so will struggle. The UK tech industry competes globally so if you’re top-end talent, you can choose where to go.”

Derrington’s concern is that the referendum result has sent out a message to international talent that the UK is not as welcoming as before: “It’s about tone. There’s a perception that the referendum was about immigration, and people feel the UK is more closed off as a country.” 

Dr Charlotte Galpin, lecturer in German and European politics at the University of Birmingham, says this perception is potentially damaging for attracting talent. “We have been considered a cosmopolitan, tolerant and open nation, but Brexit signals a move away from that,” she says. “Brexit and Trump are often talked about in the same context. If businesses are looking to recruit from other countries, the impression the UK is giving about what it’s like to work and live here impacts on our ability to recruit.”

A further issue is the devaluation of the pound since the vote to leave, Wrethman points out – workers who send money to families in EU countries are potentially remitting around 17 per cent less than before: “Lots of transient workers who came here at their own expense to work for the minimum wage are despondent because something out of their control diminished the value of their earnings.”

How can UK businesses grow their own skills? 

Many organisations are looking to address the pressure on talent through domestic talent initiatives, such as apprenticeships or engaging with school students about career options. PPHE Group, which runs hotels under the Park Plaza Hotels and art’otels brands, has set up an apprenticeship academy to help it deal with the shortfall in skilled workers. 

This year, it will recruit up to 40 apprentices and also has plans to hold ‘apprenticeship awareness’ lunches with managers so they know it’s a potential recruitment route. The company used National Apprenticeship Week to meet with schoolchildren to promote the benefits of a career in hospitality. 

“The key challenge we face is that, for many people, there is not a perception of a long-lasting and progressive career in hospitality,” says Jaklien van Sterkenburg, the company’s executive vice president of people and culture. “Many people see it as a part-time job or a transitional career rather than a career for life. We are looking to tackle this view by forging strong relationships and actively building talent pipelines, educating young people in the UK and beyond about the progression opportunities.” 

There is a well-established management training programme, demonstrating to staff who stick around that they can progress within the business, and employees have multiple opportunities to move internally. “We encourage our team members to move roles internally and experience working in new markets and regions,” adds Van Sterkenburg. 

Sixty workers who had just completed a summer season in Croatia, for example, were transferred to Germany once the Croatian resorts had closed. “Not only do our teams appreciate the fact that they can experience working in different countries and cities, it is a great way to share skills across the business and promote top talent,” she says.

Increasing internal mobility will pay dividends regardless of the wider economic climate. Ian Symes, chief executive of talent management firm Right Management, says: “Investing in personal development will give people the ability to move across their organisation. We also need to reskill and equip teams to deal with AI and automation, which will also affect roles and create new jobs.” 

But Professor Len Shackleton, from the Institute of Economic Affairs and the University of Buckingham, believes the impact of Brexit on skills has been exaggerated. “People have drawn attention to the fact that net migration has fallen. But it’s net migration – people are still coming in, and they still will,” he says. “We can make the conventional noises around ‘we must train up more people’, but the policy levers for this are not great – the apprenticeship levy isn’t going very well, for example.” 

He adds that companies may be more likely to import materials from elsewhere or automate to reduce rising labour costs, rather than looking to internal investment: “It’s all part of a wider shake-up that could occur so that companies can gain competitive advantage in different areas.” 

What do EU migrants think?

People Management’s exclusive survey of EU citizens living and working in the UK makes sobering reading when it comes to migrants’ general levels of engagement, and their future intentions. Not only do 86 per cent feel less welcome than they did two years ago, this change in attitude is overwhelmingly the largest factor that would drive them to leave the country.

EU citizens in the UK have become increasingly mobilised since the Brexit vote; a number of groups are seeking to pressurise the government into providing greater clarity and rights for Europeans, among them the3million, which is challenging the government in court around its attempts to collect data on immigration for use after Brexit. The Migrants’ Rights Network, meanwhile, has organised two ‘days of action’ where EU nationals have stayed away from work to highlight their contribution to society.

What happens next?

It may be months before we have full clarity on the intricacies of post-Brexit working rights and regulations, but that doesn’t mean you should do nothing. That runs the risk of not being able to react to other developments, such as the rise of AI and automation at work, or the potential of scouring new pools of talent. “Organisations are frozen, stuck in a moment of time,” says Symes. “In these times, people look towards leaders for reassurance. If you don’t communicate, individuals start to reach their own conclusions about what this environment means for them and their career.”

The CIPD/IES Brexit workforce planning guide says this could be a period of opportunity for many employers. There are clear advantages in “hiring less, being more attentive to internal development and widening recruitment channels”, it advises, with potential cost savings too. There’s no time to waste.

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