Brexit and Immigration
By Gareth Jarman, Director, HR Advisory, Radius
Over the past few months, the West has continued to reverberate with political change. We saw the Brexit referendum in June. In November, the US electorate sent a populist message to its political establishment with the election of Donald Trump.
Since Brexit, the populist trend has continued across the EU. In December, Italian prime minister Matteo Renzi stepped down after his constitutional reform plan was defeated in a referendum that was again widely interpreted as an anti-establishment vote. In particular, it’s been viewed as a vote for Italian sovereign determination and against the EU. An anti-EU party in Italy known as the Five Star Movement has grown in popularity.
As we enter 2017, we have Dutch, French and German national elections pending. Like the other votes mentioned, these will likely be determined by each electorate’s perception of the EU’s principle of the free movement of EU workers, and if that principle leads to an untenable lack of sovereign control. This issue will largely shape whether or not these nations continue to participate in the EU project.
Stability in the UK Labor Market
There have been adjustments in the UK’s economy over the past six months, most notably the fall of the British pound. As a recent Wall Street Journal article explains, however, Britain’s “economy has performed better than most experts expected since June’s Brexit vote,” in part because of steady consumer spending. In addition, the pound’s decline has in the short term assisted in boosting both exports and the UK’s GDP.
There are of course downsides to falling domestic currency, such as inflation, but the UK has continued to enjoy a buoyant labor market, with low levels of unemployment. In my last Brexit-related post I noted that large organizations with operations in Britain such as Nissan were awaiting the outcome of the UK referendum before announcing continued investment there. Since then, Nissan, Astra Zenica, Glaxo Smith Kline, Google, Facebook and others have all committed to continued UK investment and job creation.
In her recent speech on Britain’s Brexit plans, however, Prime Minister May made clear that the UK will exit the EU’s single market, which has left some UK businesses to consider contingency plans. The major European banks HSBC and UBS, for example, declared after May’s speech that they will move some jobs from London to locations in Europe, where business necessitates an EU presence.
UK Government Considerations
Providing access to critical skills and a capable workforce are critical to attracting investment in a country. The UK government knows this. As it exits the EU’s single market, the UK must remain an attractive country for workers inside and outside its own borders.
In my opinion, the UK will meet this challenge. Britain has been a trade-oriented, internationally focused economy for hundreds of years and this will not change. The challenge for the government is to place sensible controls around net migration while supporting local businesses to attract and hire talented people from the EU and beyond.
Investing in UK Talent
Many assume that slowing the number of immigrants into the UK will strangle its economy. Indeed, during consultation, the government will be keenly aware that policymakers and industry leaders will want to protect the UK’s economic engine. While Brexit will almost certainly lead to a shortage of workers in some areas, it is hard to envisage that the government will not continue to welcome the labor required to power growth, particularly skilled workers in science, technology and financial services.
Here are some immigration-related changes I do foresee:
- Citizens from the remaining EU countries will no longer have an automatic “right to work” in the UK. That said, the UK government will still want to welcome workers with skills that are in demand, whether they come from the EU or further afield. The truth is that we don’t know at this point how Brexit negotiations will restrict the availability of skilled labor for the UK. It is likely that certain individuals will be given preference based on skills, key industries (e.g., financial services and medicine) and/or nationalities (based on trade agreements). It’s worth adding that Prime Minister May has stated she would like to guarantee the right of EU citizens currently living in the UK to retain that right, but she wants reciprocal agreements for British citizens living within the EU.
- The UK will likely increase its investment in and promotion of vocational skills in preparation for Brexit. At the time of drafting, Prime Minister May was preparing to announce a new industrial strategy, investing £170 million in regional technical hubs aimed at developing STEM skills, providing greater opportunity to plug skill shortages, increasing UK self-reliance, and promoting key industries such as automotive manufacturing, technology and medicine.
- Industry will also almost certainly increase investments in technical and vocational training schemes such as apprenticeships. This will likely be accompanied by increased investments in employee engagement and retention.
Finally, we should remember those major elections pending this year in the Netherlands, France and Germany. Their outcomes may further challenge the EU’s free movement of labor principle. If so, the level of uncertainty for doing business beyond the UK, and within wider European borders, might also dramatically increase.