Brexit Poses a Threat to Britain’s Available Talent

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The pipeline of talent to UK firms may be in jeopardy as Brexit (an abbreviation of "British exit" which refers to the possibility of Britain's withdrawal from the European Union) threatens to shrink the labor pool from which companies in the United Kingdom source talent. With hiring intentions among Britain’s employers at their strongest level since 2007 (according to ManpowerGroup’s Employment Outlook Survey or MEOS) Brexit poses a problem for companies trying to fill positions in 2016.

Every region in the UK is optimistic about hiring, with the East, South West and London particularly so, all at +10%. While the MEOS survey results are good news for the UK’s jobseekers, ManpowerGroup is warning that employers could face a shortage of talent if Britain votes to leave the European Union. The demand for talent may exceed the available talent if employers are limited to British talent. The national seasonally adjusted Net Employment Outlook (NEO) is at +7% for the second consecutive quarter, a start to the year not seen for nearly a decade in a global employment climate that is already struggling with skilled talent shortages worldwide.

James Hick, ManpowerGroup Solutions Managing Director: “British businesses continue to create the job opportunities that have helped get Britain back to work since the 2008 financial crisis. But while there’s clearly the demand for workers, we also need to protect the supply of talent. Employers of all shapes and sizes rely on the free movement of people inside Europe to find the skills they need. The latest employment statistics showed that of the 521,000 jobs created in the last 12 months, 215,000 were filled by people from elsewhere in the EU. 1 Let’s be realistic: we simply won’t be able to replace overnight the skills these people bring to the UK if we leave the EU, and it’s our economy that will suffer. Unemployment is at its lowest level since 2006 – it’s unrealistic to suggest there’s enough slack in the labour market out there to fill these jobs.”

“We’ve already heard that some major UK employers plan to switch high quality jobs from the UK to other countries in the event of Brexit – for example, HSBC has threatened to shift 1,000 banking jobs from London to Paris if Britain leaves. We think there’s a real danger this could be the tip of the iceberg.”

While no one can predict the exact effects that a Brexit would have on workforce strategy within Britain, considerations should be made for the following should Britain vote to leave the EU:

  • Working Time Directive and Overtime Regulations
  • Observed Holidays
  • The validity of certain Certifications and Licenses
  • Employer Taxes
  • Subsidies from the EU to workers such as Fishermen
  • Increase in border control and related jobs
  • Regulation of Telecommunications

Government policy is influencing hiring in other areas, with some retail and leisure firms looking to hire young workers before the National Living Wage comes into force next month. Currently, the anticipated hiring among retailers stands at +8% NEO, which is its highest level since 2007. Mr. Hick added ““The National Living Wage will have a huge influence on retailers and leisure companies, and firms are still grappling with how the changes will affect them. We’ve already seen high profile companies like Costa Coffee and Next saying they will need to raise prices to pay for the changes. Some companies are taking advantage of the age rules by hiring under-25s who are not eligible for the new pay rate, while others are changing their overall compensation packages to lessen the impact of the changes on their profits. We expect many to reduce pay for overtime and bank holidays or to flatten their structures and reduce the number of better-paid supervisory roles. The next six months will show the effect any ‘leveling down’ of wages has on the workforce, and long term we believe there will be job cuts.”

The slump in oil price and its knock-on effect on consumer energy prices, which has led to all the Big Six energy companies announcing price cuts, is keeping optimism in utilities well below the national average at +4%, down 13 points year-on-year. Hick continued, “It’s been a difficult year for the big energy companies. We’ve seen the big oil companies cutting jobs in the North Sea and the major consumer energy firms losing market share to their smaller competitors. But the introduction of smart metering is providing one bright spot for the sector. We’re seeing the large energy firms recruit thousands of people to fit new smart meters, and we expect to see this accelerate as this technology is launched nationwide.”

While most EU citizens do not appear to be concerned that Britain will leave the EU in reality, it is important for employers to have a well thought out strategy to cope with the repercussions should the vote be in favor of leaving. The National Living Wage, the slump in the energy sector and increased need for skilled workers in Britain will only exacerbate the challenges that Brexit would bring to companies in the UK already struggling to fill roles due to the global talent shortage. Access to the EU labor pool certainly makes filling these positions easier, reducing the time-to-fill and ultimately the pay rate with a larger labor pool to draw from reducing the competition amongst employers for skilled individuals.