In June, the United Kingdom (UK) voted to leave the European Union (EU) and has led to a series of mixed reactions and emotions. While it is definitely a transformative decision, the interest comes with a lot of uncertainty mainly for businesses, employees, and job seekers. Moreover, Brexit has huge effects on investments.
In a survey conducted by Recruiter Randstad UK, 17 percent of 340 Human Resources professionals polled last May already froze their hiring activities, while around 25 percent filled jobs through short-term contracts.
In this article, we will highlight some of the consequences the UK is experiencing from its recent departure from the coop in terms of employment and business.
The Brexit Effect
According to Labour Force Survey’s April-June 2014 report, there are about 1.73 million EU nationals who are living in the UK and about 79 percent of them are currently employed.
Here are some ways the Brexit will affect businesses:
- There’s the issue of securing a work or business permit if you want to set up shop or work in an EU country.
- Expats and international students could also face the potential new restrictive rules.
- Families of international students, expats, and British citizens will also be obliged to secure additional requirements to support their move abroad.
How will it affect job seekers and immigrant workers?
- A survey from PathMotion found that if UK businesses can’t hire EU graduates freely because of Brexit, 25 percent of employers will most likely increase employment of British graduates.
Locally, this could mean good news. But, in the long run, less competition doesn’t necessarily help younger job seekers land jobs because of the immigration’s effect on the national economy.
- According to the London School of Economics and Political Science, the campaigners who pushed to stay with the EU said that immigrants give more to the economy than they take out in terms of taxes. With this, they are contributing to the reduction of budget deficit, along with not negatively affecting a few local services such as education, health, crime, and social housing.
How about the professionals from different sectors?
- Brexit poses a challenge to the IT sector hiring software engineers extensively from EU countries, especially from Eastern Europe. Just the same, having knowledge of potential new regulations will become a useful skill for people looking for IT jobs in the UK.
- According to experts, the service sectors involved in the EU trade will most likely be affected by the Brexit effect. They also estimated that professionals in the tourism, car manufacturing, and financial services would suffer significant losses, as these industries manoeuvre the post-Brexit struggles.
- Multinational corporations (MNC) and international businesses also warned that the UK would have fewer companies coming in to set up shop and offer employment, as leaving the EU will make it less attractive to MNCs.
How Brexit Will Impact SMEs and Enterprises
- Small and medium enterprises in the UK will also feel the post-Brexit effect whether or not they are hiring expats or local graduates. This is because the EU has several SME financing programs, which will no longer be available to UK SMEs due to Brexit.
- The European Investment Bank (EIB) operates these special SME programs, whose impact in SME lending is not that large, so to speak. Some say that the UK could cash in on its EIB capital to create a similar program for UK SMEs.
- EU banks own part of the retail banking system in the UK, but the legal status change isn’t expected to have direct consequences on SME lending and other retail operations. However, an EU membership increases UK’s level of creditworthiness.
- In the greater scheme of things, borrowers in the UK might end up having to pay more for credit due to Brexit.
- Another consequence is the reduced availability of external financing for the UK economy, which suggests reduced availability of SME credits.
What the UK Businesses Should Prepare for Post-Brexit
- Inflation. Petrol pumps upsurge will also most likely increase the prices of goods due to a more expensive logistics. In this case, both businesses and consumers will feel the weight of the Brexit effect.
- Effects on trading partners. Businesses should also monitor how Brexit will affect their partners’ financial situation, whether these are the customers or their suppliers. Analysing how the change will affect their current partnership will help them come up with better-informed decisions.
- Change in interest rates. There is an expected easing of monetary policy which would affect the base rate. While this doesn’t necessarily result in the fall of borrowing costs, the uncertainty could lead to a rise.
- Change in exchange rates. A potential increase in prices could affect a company’s trading margins, especially those who depend on imports. Production costs could rise because imported goods are now more expensive.
Is It Worth It?
Employers in the UK have long benefitted from the freedom of movement between EU countries, especially in terms of hiring talented professionals from overseas and vice versa. But, all of that could change because of the Brexit effect.
Then again, there could still be positive outcomes from this historical move, as well as ways to deal with the situation. By having a compelling strategy for an EU office, for instance, business growth could be sustained despite the Brexit. It all comes down to how businesses will react to Brexit that will affect its success.
Angela Hood, a serial entrepreneur from Austin, Texas, emerged with ThisWay Global after three years of research and incubation in the UK at ideaSpace, the University of Cambridge. Now operating across the world, the solution to the global recruitment and retention problem combines diverse technologies with its proprietary Match-ic machine learning algorithm, recruiting and retaining better people, and creating more diverse and improved teams. Angela is a business leader in her field and often speaks at events on human capital and diversity for startups, technology, enterprise, and entrepreneurship.