Brexit and its impact on talent management.

with no clear resolution in sight, how can employers prepare for uncertainty?

| 4 min read |

With the U.K. Parliament’s rejection of the latest Brexit deal, many employers and workers have been thrown into a state of chaos. At stake are some potentially far-reaching consequences should the country reach the March 29 deadline without a deal in place with the European Union. But how exactly will these developments affect the labour market?

That has been on the minds of human capital leaders for several years since the passage of the Brexit referendum in 2016. With the Brexit deadline now just weeks away, employers as well as EU nationals working in the U.K. are feeling the strain of uncertainty.

The rejection of Prime Minister Theresa May’s agreement on January 15, and no apparent meaningful shift in stance since then, has done little to reassure some nervous observers. They fear that a no-deal scenario could trigger a recession in the country. So how will your company be affected in the days ahead?

Labour market data shows that with a strong economy, the U.K. is struggling with finding critical skills. If your company is among those facing talent scarcity, expect this to continue. The reason: the uncertainty has left many EU nationals discouraged from seeking employment in the United Kingdom.

According to government data, the number of EU citizens employed in the U.K. fell by 132,000 as of September 2018. This is the largest decline since recordkeeping on this particular statistic began in 1997. Month-over-month data shows that this trend has been growing for some time. Expectations are that it will continue, especially if there is no agreement after the deadline.

The most apparent impact of restricting labour movement is scarcity of talent. While many of the EU workers in the U.K. are part of the blue collar workforce – supporting industries such as retail, wholesale and hospitality – a notable number are considered highly skilled. In fact, 14% of EU-born workers are involved in scientific research and development. Also notable is that different regions of the EU send varying levels of skills to the United Kingdom. On average, those from the EU14 possess more education and earning more than U.K. nationals.

Changes in the Tier 2 visa system for skilled labour, however, remove the cap on the number of visas and reducing the education level. This may actually help encourage more of these workers to seek employment in the United Kingdom. Still, that won’t help some industries that heavily rely on hourly labour.

One survey conducted last year showed that 60% of companies saw the skills shortage at their firm increase, and a majority believe it will get even worse. CIPD, the association for HR professionals, reported that as of the fall of 2018, applications per vacancy have declined across all skill levels since the summer of 2017. They have dropped from 24 to 20 for low-skill roles, from 19 to 10 in medium-skill roles, and from 8 to 6 in high-skill roles.

The EEF, the U.K.’s association for manufacturers, warned last year that nearly half of its surveyed members are concerned about access to skills due to Brexit. Seventeen percent (17%) report a slowdown in job applications by EU citizens.

With Brexit’s uncertainty impacting both high- and low-skill immigrants in the U.K., some industries are becoming concerned. Just ahead of the January 15 vote, healthcare sector leaders warned that a no-deal scenario could trigger a national “disaster” because so many workers are foreign-born.

For instance, one-third of care providers in London are EU nationals, and the country currently relies on EU members to provide a steady pipeline of nurses, health aides and other workers. A no-deal Brexit could lead to a six-month disruption to that supply chain, one industry leader told Parliament.

Similarly, a survey conducted last year by the Construction Industry Training Board showed that nearly half of UK construction firms were already anticipating recruitment to become more difficult due to Brexit, especially for skilled workers. As a result, many are focusing on retaining existing workers rather than investing in greater recruitment capabilities.

Whatever industry your company may be in, it’s unrealistic to believe retention alone will address your talent needs. Even if you were to retain 100% of your workforce over the next several years, it doesn’t address changing needs due to digitalisation, expansion into new markets and retirees.

What’s needed is a comprehensive strategy to train, retain and acquire new talent, but the challenge for many is to do so in a time of instability. Just as important, U.K. employers need to reassure EU nationals in their workforce that they have the company’s full support when it comes to immigration status. Determining the impact on talent potentially leaving the U.K. is difficult, given the degree of uncertainty, but employers can help alleviate the concerns of workers.

For instance, organisations can help workers apply for “settled” status, which grants them permanent stay in the country. There are, however, some qualifying conditions that must be met, including five years of residency in the United Kingdom. Even those who don’t meet this requirement can apply for pre-settled status, which can lead to settled status at a later date.

The Government's recent decision to now waive the settled status fee has been broadly welcomed by all sides of the debate. Even after Brexit, EU nationals will be entitled to work in the U.K. during a transition period, but will they feel welcome? That will partially depend on how much support employers provide.

There are additional steps you can take to better prepare for any impact that may occur. For instance, even without an agreement, the flow of workers to and from the EU won’t end completely. Knowing what skills and salaries are most affected will help with your workforce planning.

Additionally, outsourcing and recruiting from non-EU nations may help address talent shortages. Most importantly, acquiring the legal and practical expertise to guide you through these turbulent times is key to building an effective talent strategy.

Read our white paper to learn more about the potential impact of Brexit on your workforce strategy, then learn more about building a talent strategy that helps you adapt to change.