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Employment Matters

Brexit: the impact on free movement of workers
Employment Matters

Employment MattersIssue 6 | July 2017

Date
28 July 2017

The rate of unemployment in the UK is just 4.6%, according to the Office of National Statistics' UK labour market statistical bulletin, published on 15 June 2017.


Brexit: the impact on free movement of workers

The rate of unemployment in the UK is just 4.6%, according to the Office of National Statistics' UK labour market statistical bulletin, published on 15 June 2017.  This means that if allowances are made for natural fluctuations in the number of people changing jobs in a fast-moving economy, the UK is at full-employment.  With such high rates of employment, it is little wonder that many businesses are struggling to fill job vacancies.  The ONS reports that for March to May 2017 there were 9,000 more job vacancies in the UK than December 2016 to February 2017, and 24,000 more job vacancies than for the same period in 2016.  As the continuation of freedom of movement for EU workers hangs in the balance, the difficulties may only increase.

The result of the general election on 8 June 2017 may have reduced the probability of a hard-Brexit.  In order to soften Brexit, it's possible that one or more of Theresa May's key Brexit principles – of which the termination of free-movement is one - will need to be reversed.  David Davis has stated that the UK plans to make a "very generous" offer to the 3.6 million EU citizens currently living in the UK, however  what will constitute a "very generous" offer is unclear at present.  In its June 2017 statistical bulletin, the ONS reported that the number of EU nationals working in the UK is currently 2.32 million.  If the government is to meet its goal of reducing net migration to under 100,000, the outcome of any offer will need to exclude all current EU nationals from the net migration figures.  As a best-case scenario, this could be achieved by offering all EU nationals currently exercising freedom of movement rights in the UK permanent residency at the time the UK officially leaves the EU in March 2019, or by allowing any EU national in the UK at that time the right to continue on a course to permanent residency.

Post-Brexit, however, the regime for EU nationals who wish to come to the UK for work is likely to be stringent. The government may continue to argue that the implementation of an immigration system for European workers which is similar to the current Tier 2 Sponsorship system for non-EU workers will be required.

The current Tier 2 Sponsorship regime is costly for the employer (at the time of writing, the total cost in Home Office fees alone for a large company to obtain a Tier 2 licence and meet all Home Office fees to bring a Tier 2 worker to the UK for five years is at least £8,849) and places complex procedural and regulatory burdens on employers to meet strict obligations and responsibilities in relation to their Tier 2-licenced sponsor status.   

The imposition of the same financial and regulatory burdens on companies operating in the UK who look to the EU to fill skill shortages will act as a deterrent to many, leading to a further intensification of the current recruitment crisis and a consequential impact on the UK economy.  A more palatable and encouraging solution for UK businesses and the UK economy may be to have a lighter-touch and more flexible approach to future EU workers.  Whether by way of a shortage occupation list for industries with a high reliance on EU workers such as agriculture, hospitality, banking and finance, or by way of industry-specific visas governed outside of the current onerous Tier 2 regime for non-EU workers, any future regime should recognise the UK as a desirable place to work.