Brexit Means and the Potential Skills Gap: New controls on immigration present problems

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By Pamela Wasley and Charles Wilson, special to B2BNN

Many businesses fear what Brexit will mean for the British businesses that employ migrants and rely on international talent pools. Currently, British businesses have the ability to employ workers from within the European Economic area without requiring immigration permission (which includes the EU, Norway, Iceland, Switzerland and the principality of Lichtenstein). Of the 8.5 million people living in London, one million are European immigrant employees, and in all of the UK, there are 2.1 million EU migrants.  So as you can see, EU migrants provide the British economy with on-demand skills that can be difficult to fill with British citizens alone.

Because the EU guarantees free movement of labor among its member states, Britain’s membership with the EU made it easier for immigrants to find work in the UK. However, Brexit will undoubtedly change that. Industries like construction, engineering and IT are already facing a talent shortage, and that gap will likely widen if the movement of labor is restricted.

American companies have a strong stake in the UK, responsible for employing over one million people there. Due to fears around Brexit, Morgan Stanley reportedly has started moving 2,000 staff based in London to either Dublin or Frankfurt, and other major American companies like Citigroup and JPMorgan have threatened to pull out of the UK or drastically reduce their number of employees. Nonetheless, it may be too early to tell whether this move is wise, overly hasty or indeed necessary.

Although it is possible the UK will decide to negotiate for the free movement of labor in return for an agreement on the free movement of goods, in the absence of such an agreement, recruiting workers from the EU will become increasingly difficult. When the UK begins its formal exit from the EU by invoking article 50, the UK will have two years to renegotiate their relationship with the EU. However it’s more likely that the renegotiation will really take at least seven years to finalize. In the meantime, the status quo will likely remain the same, but for how long exactly no one knows. It is certain that regardless of what happens next, UK employers are entering a time of flux and uncertainty.

Waiting for Brexit’s next steps

As businesses face future uncertainty and potential employee shortages, should companies like Citibank, Microsoft and others make a fast exit? Perhaps not yet. The string of hope for employers is that there is still time to lobby for a deal preserving the free movement of labor under the Norwegian Model, or something similar. Norway is subject to the same immigration rules as other EU member states, similar to Switzerland. Under this model, the UK would have some autonomy but could not control EEA immigration while having access to the EU’s single market without control as to how EU policies evolve. However, the uncertainty businesses currently face can damage a company’s ability to hire, while also posing a threat to employees’ sense of job security. Due to this insecurity, businesses are more likely to delay their decisions on permanent hires until the repercussions of Brexit become clearer.

The appeal of the flexible workforce

While businesses wait for the official next step, interim managers and contractors will likely be taken on to mitigate and manage risk. In uncertain economic times, there tends to be a shift towards a flexible workforce rather than permanent hiring. Therefore, freelancers and contractors may end up benefiting from the economic upset of Brexit. If this is the case, an increasing number of skilled professionals within the UK and possibly EU may be incentivized to take on contract work. While there will likely be a rise in freelance work within the UK and beyond, leaving the EU may mean that the contingent workforce may lose the ability to travel and work freely in the UK, which will have to be taken into consideration.

In this time of flux, interim management also becomes an appealing option, allowing businesses to hire experienced professionals without taking on the risk of a bad hire. Broadly speaking, there will be an increased demand for lawyers, financial advisers, communication experts and political lobbyists, and more, according to the Recruitment and Employment Confederation (REC), a UK body that represents recruitment firms. Because most interim managers offer flexible or rolling contracts, interim management may become not just an appealing option, but a necessity for businesses struggling to make strategic decisions going forward. Using interim managers as troubleshooters and experienced organizers could help companies implement strategies to deal with Brexit.

The extent to which Brexit will impact the UK labor market largely depends on the Brexit model chosen. While businesses wait for the next steps to emerge, many are likely to choose a strategically cautious path by turning towards interim managers to buffer the upcoming uncertainty and transitions. Businesses can’t stand still to see what happens and whether it’s a tech start-up or global corporate, decisions and their actions have to be taken. With the risk of hiring permanent employees at an executive level when the future is unclear, the appeal of an interim manager that brings immediate impact but can be ‘turned off’ if the direction changes, is extremely strong.

While initiating Brexit happened in the blink of an eye, it will take many years before the consequences are fully addressed let alone resolved.

About Pamela Wasley

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Pamela Wasley is CEO for Cerius Executives (www.ceriusexecutives.com) and member of SMW-Interim Worldwide. She is a serial entrepreneur who has personally sold two companies and recently led a management buyout of Cerius. She is an expert at helping companies develop higher shareholder value through the strategic development of rapid growth and profitability opportunities with industry experience ranging from technology, telecommunications, medical device, manufacturing and business services. She serves on several private company boards and is a frequent speaker on the topics of talent management, millennials and contingent workforces. Connect with Pamela @PamelaWasley @GetCerius.

About Charles Wilson

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Charles is head of Commercial Interim and TMT at Penna Plc (www.penna.com) in London, and member of SMW-Interim WorldwideCharles manages the commercial interim team as well as leading the telecoms, media and technology practice. He has worked in executive level recruitment for over 14 years partnering with organisations through times of change. Through his network he provides executive and senior level interims up to and including C-suite and in areas of transformation and change. Charles’ assignments have been internationally and UK based with blue-chip global organisations as well as SME’s and Private Equity backed business.

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