The key challenges facing recruiters during Brexit negotiations

The departure of the United Kingdom from the European Union means that Brexit is presenting challenges for the recruitment sector. However, until we finally leave the EU, scheduled to be at the end of March 2019, the uncertainty will continue and bring with it, quite a few Brexit hiring challenges along the way.
 

Back in 2015, the UK exported an impressive £133bn worth of goods to the EU, but failure to correctly negotiate a new trade agreement as a result of Brexit could come at a cost of £4.5bn a year. That would be an unwelcomed scenario and depending on how negotiations progress, there is a possibility that the UK could lose its tariff-free access to the single market. For the past year, the UK’s regional areas have been experiencing a boom in foreign direct investment (FDI) so if the UK does lose tariff-free access to the single market, investors may face higher tariffs, which could see investment opportunities into hiring and expansion decrease. That said, as a net importer from the EU, tariff income would actually increase into the UK which could be invested elsewhere.
 

A number of big international companies with key offices in the UK such as JP Morgan and Ford have made it clear that they would “review their investments in the UK”. Visa are considering relocating, which would directly affect their employee retention strategy. Equally, there are several businesses that are choosing to continue ‘as per normal’ but with the mindset of deferring major decisions concerning investment while negotiations are ongoing.
 

Across industries, Brexit uncertainty has altered the mindset of hiring. The UK’s service sector growth has been hit by the uncertainty and that has been one of the main impacts for UK businesses. The climate of Brexit has made it difficult for them to plan and create long-term strategies due to the constantly changing outlook. For example, Global Management Consulting firm Oliver Wyman believes that up to £10bn of tax revenue and 70,000 employee positions are at risk from a ‘hard’ Brexit.
 

Regardless of the uncertainty for many companies, vacancies will still need to be filled. According to the Federation of Small Businesses (FSB), 21% of employees working at SMEs are non-UK nationals. 
 

The government has stated that it will allow EU citizens to apply for 'settled status' – which if successful, grants permanent residency – if they have lived in the UK lawfully for at least five years. Those who have not lived in the UK for at least five years can apply for a new status that allows for a temporary residency period. This has yet to be agreed in the overall negations but is a positive step in preventing a huge skills gap and yet another hiring challenge for companies.
 

In the midst of all this, international companies haven’t been slow to take action to protect their interests. Although UK based Lloyds of London failed in its efforts to obtain “passport” rights for financial companies to conduct business across the EU after Brexit, it set in motion plans to set up a subsidiary in Brussels in its bid to secure access into the European markets. In addition, Standard Chartered are set to turn one of their existing offices in Frankfurt into a subsidiary and plan to fill the premises with local employees. Although, they will need to update their legal status.
 

How is this affecting UK industries? Competitive markets such as the automotive industry, pharmaceutical industry, airline sector and finance industry, could be hardest hit. The Brexit result saw the biggest slide in consumer confidence for more than 26 years and many automotive companies see the EU as the best place for their operations. Lee Hopley, Chief Economist, The Manufacturers’ Organisation (EEF) said: “The Brexit vote has put the manufacturing sector’s recovery in jeopardy.” While Jeremy Cook, Chief Economist & Head of Currency Strategy at World First said: “Brexit uncertainty, higher costs and lower investment are slowing UK output to a chronic crawl.” 

Conclusion

In the wake of Brexit, the UK could be free to make its own trade agreements without having to comply with EU regulations. That would see allow UK service industries like banking, for example, to benefit from smoother access to other marketplaces like China. In the meantime, international companies with a historic UK base are proactively setting up EU subsidiaries in preparation for the possible outcomes.
 

We’ve seen that after Brexit the pound fell to its lowest level in 31 years and what tends to happen after monetary devaluation is that exports naturally become cheaper. With this in mind, the UK should become a more attractive place to invest for businesses, but many international companies based here are being cautious about taking up investment opportunities, and have been quite candid in admitting that investment decisions are being delayed.
 

Over many years British businesses have proved to be pragmatic and adaptable. No matter what the outcome, over time we have confidence that we will bounce back. The biggest challenge we face currently is the uncertainty between now and March 2019. Once businesses know and expect an outcome they will adapt accordingly. Whilst there will be losers from this there will also be winners. The ongoing Brexit negotiations have had a direct impact on the UK economy and have affected short and long-term hiring strategies for a range of industries. Although this has created interesting hiring challenges for the weeks and months ahead, it will also present distinct opportunities that UK businesses can seize upon.