The UK’s decision last June to leave the European Union has enormous consequences for all of us – for businesses this means leaving an institution that has been the cornerstone of our trading relationship with the European continent for over 40 years.
Whilst business communities across the UK have shown a remarkable resilience to grow, invest, trade and recruit since the European referendum, they are uncertain about the future as the UK embarks on the process of dis-entangling itself from the EU.
Chambers of Commerce have been in deep consultation with local business communities across the UK since the referendum and the key priorities of business are clear. They want the next government to secure an EU trade deal that minimises costs and trade barriers. Currently there are no tariffs on the movement of products among EU member states, but if a deal isn’t reached in the negotiations, reverting to WTO rules could result in tariffs of up to 10% being imposed on the export of cars for example, creating huge costs and complexities for integrated cross border supply chains.
However, it is the non-tariff barriers that often carry a greater cost to businesses. Areas that will need to be resolved include the mutual recognition of standards, contracts and qualifications, the sharing of data, and rules of origin. Negotiations on these areas will be complex, but need to be successful to keep costs and regulatory burdens to a minimum.
Businesses have consistently expressed concerns about their ability to source the talent they need to grow. Current levels of low unemployment and an ageing workforce have meant that foreign labour has been a critical part of business recruitment. The uncertainty over the status of EU nationals currently living and working in the UK has already had a negative impact on the retention and morale of employees. The next government must provide immediate certainty for businesses on the residence rights of their existing EU workforce, not contingent on any other aspect of the UK negotiations with the EU-27. A future UK immigration system must allow businesses to access workers from the EU in sectors where there are acute labour shortages with minimum bureaucracy, cost or barriers.
The publication of the Great Repeal Bill white paper in March 2017 was a positive step in providing regulatory certainty for business on the day that the UK leaves the EU. The bill aims to convert existing EU law into UK law; give Ministers the power to amend these laws using statutory instruments to reflect new institutions and legal jurisdictions in the UK; and repeal the 1972 European Communities Act. Further work must now be undertaken to develop future customs procedures at the UK border, clarifying tax systems and arbitrations processes, and the development of a funding system to replace the EU funded projects and schemes that support higher education, research, infrastructure development, regeneration, skills programmes and business support schemes.
It is important that the UK government reflects the priorities of our business communities across all the nations and regions of the UK. This is particularly acute in Northern Ireland, which is the only part of the UK that shares a land border with the EU. Businesses want no return of a hard border on the island of Ireland, so that we can maintain free trade and people flows across the border and limit any new bureaucratic arrangements.
Both the main UK political parties have set out their wishes for a comprehensive agreement with the EU that delivers a smooth, orderly Brexit.
The business community is a willing partner in ensuring this outcome, and that the UK emerges from this process ready and able to take advantage of future opportunities for prosperity and growth.
Until the UK formally leaves the EU, European Economic Area (EEA) and Swiss nationals remain entitled to live and work in the UK without being subject to immigration control – employers need only carry out appropriate checks to confirm rights to work.
What will happen after the UK is no longer part of the EU remains unclear but it is likely that immigration control, possibly similar to the current points-based system, will apply to such workers. This means more employers may need to apply for sponsor licences and comply with sponsor obligations.
Right to work checks for all
At present, UK employers should carry out right to work checks for all staff, including Scottish and EEA nationals, to avoid any inference of discrimination. Checks must be carried out before work starts and at the same stage for all applicants. Shortlisting is a good point at which to request the necessary documents. Offers of employment should be conditional on candidates providing evidence of appropriate right to work and withdrawn if not submitted. Contracts of employment should require that appropriate permission be held at all times and be clear that, if not, employment may be terminated immediately.
To avoid the extensive penalties for employing illegal workers, employers should ensure they can establish a ‘statutory excuse’ showing right to work. This is a 3-step process involving:
Asking shortlisted applicants to produce original documents specified in Home Office lists. Utility bills, photocard driver’s licences or NI numbers alone are insufficient.
Checking, in the presence of the worker that the documents relate to the individual, are original, unaltered and valid. For example, do the photo and date of birth match?
Taking a copy of the evidence and keeping it securely, recording the date of the check and when follow up may be required. This information should be retained for two years after the end of employment.
Sanctions for employing illegal workers are substantial, with civil penalties of up to £20,000 per illegal worker. Since 2016 there have been extensive powers to search premises, seize and retain evidence and to issue a business closure notice or illegal working compliance order where businesses have flouted right to work rules. The criminal offence of employing someone the employer knows, or has reasonable cause to believe is disqualified may result in an unlimited fine or prison sentence of up to five years. Employers who hold a sponsor licence may also see their sponsor licence revoked.
Common and future problem areas
Many employers are clued up on the initial checks, when an employee starts work, but forget that this is not the end of the matter. For example, if a worker has time limited permission to work, the expiry date must be noted and further checks carried out before that date, to avoid penalties.
Care must also be taken with non-EEA or Swiss national employees, subject to immigration control, in a redundancy situation, as being offered alternative employment, which does not equate to their current role, whether in salary, location or duties, could invalidate their visa. Renewed permission may need to be sought for the new role. Similarly, such an employee who becomes disabled and requires adjustments, such as reduced hours, may find they are in the same situation.
Post Brexit, as more employers are likely to become sponsors and more migrant workers subject to immigration controls, these issues will become increasingly common. This is an issue to watch; being up-to-date with right to work checks and immigration status will make it easier to adapt to whatever post Brexit regime is eventually adopted. Employers who are unclear on their obligations in relation to particular workers should seek early advice.
The UK and the EU have recognised the sensitivity of the position of individuals and their rights post the UK exiting the EU. It is also one of the most immediate issues facing employers.
Many organisations have indicated their need for access to talent and are concerned that employees may need to leave or they won’t be able to bring in the talent in the future. The UK Conservatives still talk in terms of net migration in the tens of thousands. Irrespective of the outcome of UK–EU negotiations, the exit bill and the UK’s future relationship with the EU, employees and employers will be affected by the outcome as well as by any immigration regime put in place.
Recognising the need to stay informed, MMS invite you to join us at these seminars hosted by expert speakers from the Employment, Benefits & Immigration teams, who will take a closer look at the following issues.
-Where is employment law likely to diverge from the current European path?
-What comes after free movement?
-What can employers do now to prepare for a post-Brexit world?
This seminar would be of benefit to HR professionals, in house lawyers, senior management and anyone who may be impacted by these changes.
Agenda
1730 Arrival
1800 Seminar
1845 Q&A
1900 Networking drinks and further questions
1930 Close
Seminar Dates and Locations
13 June – Glasgow
14 June – Edinburgh
MMS Edinburgh, Quartermile One, 15 Lauriston Place
Edinburgh
EH3 9EP
14/06/2017 – 5:30PM to 7:30PM
21 June – Aberdeen
The Norway model. The Swiss model. The Turkish model. A CETA (the EU-Canada trade deal) inspired Free Trade Agreement. What kind of deal can the UK strike with the EU? And can businesses prepare for one of these options – or even for the possibility of leaving the EU without a transitional or future agreement in place in 2019?
The answer is: at the moment – no. The implications of each of these scenarios are far-reaching – affecting issues such as movement of people, tariffs, taxation arrangements, customs procedures – and the difference between each of these models is so significant, that it is currently too challenging to scenario-plan for any of these eventualities.
This is why many businesses are choosing to get on with their day-to-day work, and wait until there are further developments in the upcoming negotiations. Of course, there are some – such as those that use the UK as a hub into Europe, or businesses that were already looking to expand to the continent prior to the referendum – for whom Brexit has been a catalyst to strengthen their footprint on the continent.
For most other businesses, it is a question of wait and see. But when details start emerging on the future arrangements with Europe, the high-level discussion of models will need to be brought back down to earth. Businesses will not be concerned with how the deal will be called. Instead, they will want to know answers to questions such as: Will I now have to pay VAT on imports? What kinds of origin rules do I need to adhere to? Will I need to prepare myself for longer customs procedures? If my products go through phytosanitary checks in the UK – would they now have to go through a second set of checks in the EU?
These are the questions that will have the greatest impact on UK trade in the immediate term. Changes in areas such as taxation and customs will have significant implications for supply chains, for importers and exporters alike, for companies both large and small. But where a larger company can, should they wish, afford to think through potential answers to the above questions – SMEs will remain focused on the day-to-day running of their business, and wait until there are clearer answers.
And that is why, when significant progress is made in the negotiations, and future arrangements with the EU become firmer – the government must communicate this to businesses without delay. At the end of the day its companies that trade, not governments – so they must make sure not only to deliver the best deal for business but also take into account the tangible impacts and focus on the practicalities for firms.
Only when the future UK-EU trade ‘model’ is broken down into its practical nuts and bolts can Government truly enable companies to keep thriving in their trade with the EU – and beyond.
Research finds 64% anticipate economic downturn, but 60% confident employers will adapt
UK workers are showing significant resilience in the face of Brexit uncertainty, according to research commissioned by international law firm Pinsent Masons.
According to the survey of workers in large businesses, conducted by Yugo on behalf of the firm:
• Almost two thirds of workers (64%) believe there is a realistic prospect of an economic downturn within the next three years as a result of Brexit.
• Around 1 in 3 workers (36%) felt it likely they could lose their job as a result, while 2 in 3 (65%) thought it likely people they knew could lose their jobs.
• While 37% thought it likely their employer will increase pay to offset inflationary impact over the next 12 months, the majority (57%) expected their real pay to fall this year even though economic growth is tipped to accelerate.
• Despite that, almost 60% of workers surveyed were confident that their employer is well-placed to react to economic difficulties arising from Brexit, compared to just 14% who did not feel confident.
Scottish workers surveyed were more pessimistic compared to their UK counterparts the survey revealed.
North of the Border 76% believe an economic downturn as a result of Brexit is likely or very likely, while 60% of Scots workers think it unlikely they will receive a pay rise within the next 12 months to offset the impact of inflation.
Scottish based workers shared the same view as Londoners in thinking there was a realistic possibility of losing their jobs if there was an economic downturn (41%) but those in the Midlands were more upbeat with only 30% taking that view.
Regardless of economic factors, the survey revealed UK workers seem determined to tough it out, with 92% of workers saying they were unlikely to leave the UK in the next 12 months as a result of Brexit.
EU citizens (15%) were less assured and appeared to be twice as likely relocate abroad as UK nationals (8%).
However, the likelihood of workers leaving the UK after 2-3 years was somewhat higher – suggesting that some workers may await the outcome of Brexit negotiations before making a final decision about relocation.
Guy Lougher, Head of the Brexit Advisory Team at Pinsent Masons, said: “On the whole the UK workforce is demonstrating resilience, anticipating a downturn but retaining a level of confidence in their employers.
“What is particularly interesting is that, those workers who felt their businesses were not open about the impact of Brexit on the business were more likely to be fearful about the prospects for the future. Of those who described employer communications around the referendum as poor, 1 in 10 said they would be likely to leave the UK within the next twelve months.
“Conversely, those who rated the communications of their business highly were notably more confident about the ability of the business to react to the challenges and opportunities afforded by Brexit.
“There is a clear message to UK Plc that they need to plan ahead for the business, despite the attendant difficulties in doing so, and communicate openly about those plans with their people to engage and retain talent.”
Since the Brexit referendum last June Pinsent Masons has worked with a former military intelligence analyst to help several blue-chip companies anticipate and plan for different scenarios during and after Brexit negotiations. The firm has also launched a corporate ‘crowd funded’ advisory platform called BASe, developed an AI-enabled contracts review system and launched a Public Policy unit to support businesses in engaging with government on Brexit issues.
