CIPD Voice: Issue 17


The clock is ticking. At time of writing it is still unclear on what terms Brexit will take place, when it will take place, even if it will take place at all. For some businesses, the uncertainty – and potential for disruption – is clearly immense. On what terms will they be able to trade? Will tariffs be charged on goods exported to, or imported from, the EU? Will there be delays at customs in or out?

However, for many organisations, especially the smallest firms and those in the public and voluntary sectors, these aspects of Brexit might not make much, if any, difference. Just-in-time cross-border supply chains may matter a lot to some firms in some sectors. But in other sectors, customers and clients are predominantly local; the supply chain is the local cash-and-carry.

The impact of Brexit on employers – who they employ and on what terms and conditions – is likely to be felt far more widely than the intricacies of customs unions, WTO terms or the Irish backstop. However, in the short term, significant change seems unlikely.

Around half of UK employers say they employ at least one EU migrant, though some industries, such as hospitality, and locations, especially London, are particularly affected. These employees were recruited seamlessly. The government has made ending free movement of people one of its (in)famous 'red lines'. However, the draft withdrawal agreement includes an implementation period to the end of 2020 (or later) when employers are able to continue recruiting EU nationals in much the same way as now. Employers may need to help their current or future employees who are EU nationals with the process of applying for settled status in the UK, although one element (the government fee) has been waived, reducing the cost. It will make sense for employers to know the nationality of EU migrants, and which of them have settled status, whereas they didn’t need to know all this before leaving the EU.

Longer-term arrangements are up for negotiation with the EU, but the immigration White Paper provides a glimpse of current government thinking. After the end of the implementation period, the government intends to treat EU nationals in the same way as non-EU nationals, where that makes sense. So employers will still be able to fill positions requiring skilled labour with EU nationals, albeit with more cost and bureaucracy than at present. And there will be a scheme that will allow employers to continue using less-skilled labour, although this could be capped and time-limited.

This doesn’t seem to have been a particularly contentious part of the withdrawal agreement – unlike the backstop. Even if there isn’t a comprehensive deal, expect the UK and the EU to seek agreement on this component – or, indeed, for the UK to unilaterally implement its provisions. It might do so in the hope EU governments are similarly magnanimous towards UK nationals working in the 27 member states. But it may have little choice – the infrastructure and workforce required to do anything different surely wouldn’t be ready.

Repatriation of European employment legislation – especially the Working Time Directive – was a cause celebre in the run-up to the referendum. Things have changed, though. Talk nowadays is of protecting or extending workers’ rights. Employment rights derived from EU legislation have been consolidated into UK post-Brexit legislation. However, the future of employment legislation beyond the implementation period is still up for grabs, to be negotiated with the EU. This is a tricky issue for the UK government. Governments don’t like tying the hands of future governments, preventing them from doing something different – in this case, of having either more or less employment legislation. And arrangements that commit the UK to be a Norway-style rule-taker don’t sound very attractive either.

In the short term, though, this might be academic. Even if there isn’t a deal, there probably aren’t enough votes in this House of Commons to make more than the incremental changes to legislation that the government currently proposes. Employment legislation – more or less – may be a future dividing line for the parties. But don’t expect any substantial change before the next election.

So can the HR Director take a holiday at the end of March? Maybe, this is one aspect of doing business that might not change much in the short term, almost regardless of what happens in the next few weeks.

It’s impossible to rule out chaos and disruption at this stage – nobody knows what will happen. If Brexit leads to a sharp contraction in trade, it’s likely the government and the Bank of England will take corrective action to stimulate the economy, like the Bank did following the referendum result. But, like in 2016, if the result is a fall in the value of the pound, this could push up business costs and inflation, something that is only now working its way out of the system. And higher inflation means pressure for higher wage growth or squeezing living standards.

Furthermore, even if the rules for employing EU nationals won’t change greatly in the short term, what if EU nationals stop coming to the UK? The number of EU migrants coming to the UK for work reasons has been falling ever since 2016. If Brexit leads to even fewer coming, the result could be more labour shortages – unless employers uses alternative sources of recruitment better, or find ways of increasing the productivity of existing employees.

Mark Beatson

Mark's role includes leading the CIPD’s respected labour market analysis and commentary, while also strengthening the CIPD’s ability to lead thinking and influence policy making across the whole spectrum of people management and workplace issues.

Prior to joining the CIPD, Mark was an economic consultant and for over 20 years worked as an economist in the Civil Service, latterly at Chief Economist/Director level, in a range of Government departments including the Department for Business Innovation and Skills (BIS), the Department for Innovation, Universities and Skills (DIUS), the Department of Trade and Industry (DTI) and HM Treasury.

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