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Twelve Months Later. What about Brexit?

 

Leaving the Single Market is in motion and exiting the Customs Union is a likely outcome of Brexit negotiations as we move towards a Free Trade Agreement (FTA) and a new Customs Agreement. Indeed it is now twelve months since the UK made the decision to leave the EU and, with Article 50 triggered and our official leave date set as 29th March 2019, where exactly are we a year on? Moreover, where should we be?

According to the London Chamber of Commerce and Industry (LCCI) there is no sense of panic from London – this remains very much so as businesses continue to take a pragmatic and level-headed approach to Brexit. Nevertheless, it also remains the case that, as detailed in our Blue Book Survey 2017, 40% of UK employers believe they will see an impact on their business off the back of Brexit. What’s more is that 60% believe it is important that the UK has control over the extent to which UK businesses will have to comply with EU employment law, while 27% consider this unimportant. This means that the Government will have to work hard to retain control and autonomy on-boarding talent from overseas.

As the Government announces its intentions, with the introduction of the Great Repeal Bill, to transfer EU-regulated legislation into UK law and with more businesses increasing their investment in training and in plant and equipment it is no wonder that there is a pragmatic sense of confidence that the UK will have both control, new freedoms, and resultant economic prosperity both within and beyond Europe.

Nevertheless, certain key questions need to be addressed: what will an eventual deal with the EU look like? When will it be implemented and how can a riddle of rules surrounding migration, regulation funding and trade be handled in the forthcoming months and years ahead of us? As evidenced in The Blue Book data sample, 91% of UK-based organisations employ citizens from the European Union and 51% of continental European organisations employ Brits. Thus, there remains a vast number of employees and employers who could get caught out on the wrong side of the FTA and Customs Agreement.

Frictionless Trade

Moving on to consider trade, and perhaps more specifically the ’freest and most frictionless trade possible’ when it comes to the free movement of skilled workers, statistics show that 57% of people believe London should prioritise economic growth, even if that means increasing immigration from EU states.

In recent years the Government have made it increasingly difficult to hire workers from overseas, and further restrictions are anticipated with the freedom of movement of people between the UK and EU post-Brexit. As a result, there comes a pressing need to up skill the domestic workforce in light of counteracting the shortage of skills otherwise provided by overseas candidates. With 40% of UK employers believing Brexit will make the recruitment process harder this means continuing to plug the gaps with overseas talent, not just sourcing the brightest and the best homegrown talent, as a necessity. Access to labour and skills from the EU and beyond, particularly in the short term, is an urgent priority and, as there will inevitably be a time lag in training and investment in a domestic workforce, overseas talent will be sorely needed (and genuinely wanted) for its economic and cultural value to businesses and society alike.

Traditionally, weve been recruiting people who come from other EU states, to plug a skills gap here in London, and what weve seen since Brexit is a complete change in the geographic profile of the people were bringing in. - Colin Campbell-Dunlop, Business Development Manager, Project Recruit

London is, generally, confident about turnover and profitability prospects. This is reflected in the fact that there has been continued recruitment into UK businesses from overseas over the last year. Nonetheless, there remains an inevitable truth concerning uncertainty with the status of existing EU national employees. Whilst businesses are finding ways to deal with this and retain their skilled workforces it inevitably distracts away from the day-to-day operations and productivity of any business. This is only set to continue with negotiations remaining inconclusive - adding all the more to that perpetual feeling of uncertainty. Businesses can make recruitment plans if they know what the future holds - but they simply don’t and can’t predict the outcome of Brexit beyond the Governments negotiations with Brussels. Changes will, in due course, need to be implemented as soon as possible but also as gradually as possible in order to allow businesses to adapt and prepare for these changes in a realistic transition window.

Currently, Government targets are set to reduce net-migration and there are policies designed to make it more difficult to hire from overseas. This is exemplified in the introduction of an Immigration Skills Charge levied on employers bringing in a foreign worker under the Tier 2 Visa system. Thus, practical proposals have been raised in light of reviewing, renewing and refreshing the UK immigration system to keep London, and the wider UK, globally competitive in the wake of Brexit. This aims to protect existing EU nationals within the London workforce and provide a flexible system of migration moving forward. It is another inevitable and statistically evidenced truth that 15% of the London workforce consists of EU nationals contributing more than £26 billion to London’s gross value added. Therefore, the UK Government should start by granting indefinite leave to remain to existing EU national employees with the capital via a single-issue ‘London Work Visa’.

Despite the Governments expressive desire to secure the status of EU citizens already living in the UK there remains, once again, a strong sense of uncertainty and fear that there will be an exodus of EU nationals leaving the UK. The investment of time and money flowing into training EU nationals up to becoming some of the best and most skilled employees will create losses to businesses in productivity, profitability and diversity. Thus, with estimates suggesting that by 2020 London could have lost access to 160,000 migrant workers this will negatively impact economic output, estimated at £6.9 billion, and direct tax contributions, estimated at losses of £2 billion. This is evidenced all the more in our Blue Book Survey 2017, as 52% of London businesses believe a decrease in the level of immigration to London would have a negative impact on economic growth with 31% seeing an impact already.

International Students skilling the future UK workforce

Beyond a skilled workforce of EU nationals currently employed domestically, it is estimated that there are 100,000 + international students in the UK who have a net benefit of £2.3 billion per year to the economy, supporting almost 70,000 jobs. Students are customers; they create markets by working and consume by putting money back into the economy. Closure of the Tier 1 Post Study Work (PSW) visa in 2012, previously allowing international students to remain and work in the UK for two years after completion of their studies, now only permits them six months. Indeed, countries like Australia and Canada are more attractive destinations to study and thereafter work. Further barriers to entry are flagged up with there likely being a need for EU students to apply for short-term student visas in order to study in the UK as well as the likelihood of them facing higher fee rates that currently only apply to those outside of the EU. This only adds to the forthcoming skills shortage and details the gaps to come brought about from a notable decrease in international students choosing to come to the UK to study, to invest, and to work within our domestic economy.

As such, we, and especially the Government, very much need to stay open to talent in order to impact positively on future growth and investment decisions and to pre-empt skills shortages in UK employment markets: ’our concern is, both for us, and as a bigger picture for the UK - how our vacancies are going to get filled. What’s going to happen to businesses who need those skills that are not readily available from within’.

Ensuring access to a skilled workforce - securing the flexible migration of labour across Europe is a point detailed on the Declaration signed by representations from the Alliance of European Metropolitan Chambers (AEMC). This is a commitment declaring that we will work together for a realistic transitional period for Brexit as there is no denying that the departure of EU nationals from the London workforce and a reduction in the number of international students would be economically harmful, impacting upon key industries and putting pressure on public funds. Thus, the Government must work to achieve as frictionless a trade agreement as possible in the shortest time frame possible. This is in order to give UK businesses the opportunity to make plans, implement a gradual and realistic transition timeframe and antidote anticipated skills shortages within domestic employment markets.

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