Much of the debate around Britain’s membership of the EU has centred around the need to restrict the flow of immigration into the country. But what does this mean for the many British businesses which employ EU migrants and rely on international talent for the skills they need? And how could Brexit affect the employment and HR landscape in the UK?
Widening the skills gap
According to the latest figures, there are 2.1 million European Union immigrants working in the UK. With major skills shortages in industries such as construction, engineering and IT, EU migrants provide the British economy with vital skills which are simply in short supply among the indigenous workforce. Immigrants also make up a substantial proportion of the unskilled, low-paid job market, as well as making a big contribution to the healthcare sector – 11% of all NHS staff are not British. While it is not clear yet what status European migrants would have if the UK withdrew from the EU and its freedom of movement policy, business leaders are already expressing concerns about what impact it might have on their ability to recruit the skilled workers that they need.
If there was an exodus of EU workers following Brexit, not only would they take their skills with them but also their spending power and tax contributions. A study by University College London last year found that European migrants made a net contribution of £20bn to the public finances between 2000 and 2011, paying far more in taxes than they take out in welfare, with immigrants also more likely than Brits to set up their own businesses.
An international hub
The UK is often seen internationally as a gateway to Europe, due to factors such as its language, its pool of international talent and its lower market regulation compared to other EU members. Two in five of the 250 largest companies in the world with a main or European headquarters have it in London, including the likes of Samsung, BlackBerry and Mitsubishi. The EU is also the source of much of the foreign investment that comes into the country. Would Britain be as attractive as a location following Brexit? If companies chose to withdraw their European offices from the UK, they would be taking both their jobs and investment away with them.
Brexit could also have legal ramifications for UK employers. Excessive ‘red tape’ is often seen as a disadvantage of EU membership but EU law underpins many of the key rights that protect workers, such as anti-discrimination legislation and maternity and paternity leave. Although it is unlikely that the Government would make any significant changes to these areas given how politically dangerous it would be, it could well be tempted to repeal laws such as the EU working time and agency workers directives.
If EU workers leave the UK as a result of Brexit, this could herald a shift in the job market towards employees, with the battle between businesses for the best talent intensifying. The result would be an increase in wages, particularly for those people with skills that are in high demand in the industries mentioned above. The lower end of the job market could also see a pay boost if the influx of cheaper labour from Eastern Europe is reduced. Good news for British workers, not such good news for British businesses who may have to pay more to fill positions and retain staff. This could create opportunities for the recruitment and service industries if businesses struggle to find the people that they need and turn to outsourcing – costing them even more to recruit.
In addition, a reduction in the number of skilled workers from abroad would force the Government and businesses to invest more in training British workers to replace those that leave. There is already a big emphasis on apprenticeships, but the challenge would be to provide the economy with the right skills that it needs and attract young Brits into those less glamorous industries that have struggled to recruit homegrown workers in recent years. Businesses therefore need to consider the time and costs required to train staff, and how they can work with education providers to get the skills they need.
In summary, Brexit could have a major impact on the UK workforce and on Britain’s ability to recruit international talent. With over 2 million EU workers already in the country, any substantial reduction in that number could exacerbate the skills gaps that already exist in the economy. It would also present challenges to businesses that employ EU nationals, forcing them to invest more in British workers as well as potentially increasing the regulatory barriers to recruiting staff from Europe. Again, the extent to which Brexit would alter the UK workforce depends heavily on the exit model, but using tools that take data from your HR system and analyse possible scenarios, UK employers that use EU workers can start to assess and prepare for the potential effects of Brexit on their workforce.
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