As the UK draws ever closer to the official Brexit date of March 29th, the prospect of crashing out of the EU without a deal in place is looking increasingly likely. The government and the opposition are equally divided, and businesses are being warned to begin making preparations.
Everything from supply chains to data privacy regulations is likely to be affected by a no-deal Brexit, but one area causing particular concern among businesses is recruitment. With many UK businesses so reliant on EU staff, leaving without a deal could cause a full-scale recruitment crisis.
Ever since the referendum result that set the wheels of Brexit in motion, the government has struggled to balance its own pledge to end freedom of movement, and significantly reduce immigration, with the concerns of businesses who rely on employees from overseas.
Currently, around 5% of the UK population were born in the European Economic Area (EEA) – around 3.3 million people. The government has introduced a system by which EU citizens in the UK can apply for settled status, and later waived the proposed £65 fee to do so. This has made it easier for businesses to secure the services of the EU staff that they already recruit, but concerns have continued to be raised regarding the long-term future of recruitment from abroad.
Business leaders have expressed their concerns that, after Brexit, the UK will become less attractive to workers from overseas, and the hiring process will become more complex to accommodate any stricter immigration regime. As a result, the talent pool from which companies currently hire could shrink dramatically, leading to a major skills shortage.
The issue will be particularly pressing for SMEs, and will affect some industries more than others – around 6% of the professional services sector is made up of people from the EEA, compared to nearly 25% of the food and drink manufacturing industry, for example.
Any deal struck between the UK and EU would most likely include a transition period, during which procedures would be put in place to try and soften this impact – but leaving without a deal would lead to sudden and pronounced change.
In response, the government has announced a plan for a temporary visa system in an attempt to assuage the fears of business groups, but these plans have been met with scepticism. John Galvin, the CEO of international market expansion consultancy Galvin International, has argued that the plan is inadequate as a long-term employment solution, and would constitute the most significant state intervention into the UK labour market in decades.
With their long-term prospects looking so uncertain, a growing number of UK businesses are assessing their options for responding to a no-deal. According to research carried out by British Chambers of Commerce and Bibby Financial Services, one in five UK firms are preparing to slash their recruitment in the event of a no-deal Brexit. This is in addition to the third of UK businesses that are considering moving abroad, according to the Institute of Directors.
With the terms of Brexit still so uncertain, the UK’s business community faces a rocky period ahead when it comes to recruiting and retaining staff. Whether the UK leaves without a deal in place, or a last minute agreement is reached, businesses are understandably preparing accordingly.