Brexit has been delayed but by no means has the potential impact on Europe’s workforce lessened. This has many employers understandingly apprehensive about the impact the separation will have on the labor market in both the EU and the U.K., where concerns about accessing and retaining talent are affecting the strategies of many talent leaders.
For the U.K. market, government data shows that shortly after the Brexit referendum, a significant number of EU nationals began leaving the Kingdom, with the trend accelerating as the deadline approached.
While the U.K. has one of the largest populations of immigrants among industrialized nations – indicating its dependence on non-native talent – there is also a sizeable group of British nationals of mostly working-age adults living in the EU. According to the Office for National Statistics, there are around 785,000 Brits residing on the continent, with about 70% in Spain, France and Germany.
Although no deal has been reached, any Brexit deal is likely to create reverberations that are far-reaching and disruptive to employers. For instance, a number of businesses have relocated offices to continental Europe, resulting in higher demand for skilled workers in places such as Amsterdam and Frankfurt. Even so, U.K. demand for a variety of professionals – nurses, construction workers, IT experts – is not expected to decline significantly. In fact, the slowing of EU nationals flowing into the U.K. will likely lead to more scarcity.
Companies, especially in the U.K., shouldn’t regard Brexit only as a disruptive event for their talent strategies. There are ways for employers to minimize the impact, and the U.K. government has taken steps to help European nationals living in Britain and Northern Ireland. EU businesses can also take steps to reassure their British expat workers that they have a future with their organization.
Many U.K. employers have initiated efforts to shore up their talent pipeline so that even after the Brexit deadline, they can access to the resources needed to support their business. Furthermore, a potential transition period will provide a buffer against severe economic consequences, providing employers and businesses time to adapt to the new U.K.-EU relationship.
concerns about talent
For employers, Brexit represents a significant overhaul of the labor market. Even though the impact won’t be immediate due to residency protection for the EU workers already in the U.K., the long-term implications are consequential. Many businesses fear that access to talent, especially blue-collar, hourly workers, will be significantly restricted once the separation has been completed in a few years.
The British market has for decades relied on Europe for a steady stream of talent to fill roles such as doctors, engineers, construction workers, hospitality specialists, housekeepers and others. In fact, the U.K. has one of the largest migrant populations in the world, with 13% of the total population (8.8 million) born elsewhere. Since the turn of the millennia, this population has increased 87%, according to government data.
Of the immigrant population, those from the EU account for 3.7 million people and are the largest bloc of non-natives. From 2000 to 2017, the number of EU immigrants nearly tripled (272%). Among those coming from the Union, the Polish population is by far the largest, estimated to be around 922,000, more than twice the number of Irish or Romanian natives at 390,000 for each group.
But the U.K. economy is not solely reliant on EU labour. In fact, Nearly three million Asia-born immigrants reside in the country, with those from Indian and Pakistan accounting for the largest portion at more than 1.4 million.
In recent years, African natives arrived in the U.K. at a much higher number, driven by inflows mostly from the continent’s sub-Saharan region. According to the BBC, in 2016 the majority of those granted British citizenship came from the sub-Saharan area and South Asia. Since 2000, immigrants born outside of the EU has risen 73%, according to the U.K. government.
While the number of total immigrant workers has steadily grown over the years, talent scarcity remains a growing concern. Government data shows that the number of job vacancies in the U.K. has risen 72% since 2011, with a huge increase (148%) reported for skilled roles.
The 2017 Employer Skills Survey stated that 36% of construction vacancies were hard to fill because applicants lacked the relevant qualifications, experience or skills. The survey results indicate that nearly one in four (24%) vacancies in the business services sector were a “skills shortage vacancy” as were 18% of financial services vacancies and 29% in manufacturing firms.
When prompted to select what impact skill shortage vacancies had on their firms survey respondents said 27% of skill shortage vacancies had led to higher operating costs and 21% of the time skill shortages led to business or orders being lost to competitors. Over half of skill shortage vacancies resulted in increased workloads for current staff.
U.K. industries such as food manufacturing, domestic services and hotel and hospitality rely heavily on EU nationals to staff its workforce, whereas non-EU immigrants are more involved in roles supporting security-related activities, land transport and computer programming.
As of September 2018, the number of EU nationals in the U.K. fell by 107,000, the largest drop since Q2 2010. Notably, the change was most significant among members of the EU-8 (Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia) with a decline of 12%. Those in the original union (EU-14) saw little change (-1%), whilst the number of workers from Bulgaria and Romania (EU-2) rose 36%.
Proposed restrictions on lower-wage workers are discouraging many EU workers’ willingness to accept employment in the country. Immigrants in some talent-scarce sectors to return to their home countries or elsewhere in the EU. Starting in Q4 of 2015, the number of EU nationals leaving the U.K. started to increase after a long period of stagnation. This trend accelerated in subsequent quarters, reaching a historic high in Q2 of 2018 to 145K,000.
The U.K.’s Food and Drink Federation, which represents manufacturers of food and non-alcoholic drinks, conducted a survey in 2017 that found 47% of employers were concerned that EU nationals may consider leaving the U.K. Another sector that may be significantly affected is financial services, which as of 2016 had 7.5% of its workforce staffed by EU nationals. It relies on immigrants to supplement the shortage of skilled native workers (cited by 84% of companies surveyed), acquire special expertise (76%) and for relocation reasons (64%).
The government found that skilled engineers across many sectors – energy, aerospace, automotive, railway, construction, civil engineering and IT – are those in highest demand, followed by healthcare and IT. Among trade skills, roles such as pipe welders, licensed engineers and inspection technicians, line and cable specialists and chefs are all sought after by employers.
One of the challenges for employers trying to assess the impact of Brexit on their workforce and talent pipeline is the uncertainty of Brexit negotiations. Possible outcomes include additional delays to the U.K.’s departure from the EU, a renegotiation of the current deal, a last-minute ratification of the current withdrawal agreement or no agreement being reached.
Whatever the outcome, employers on both sides of the English Channel can prepare their talent strategy and minimize disruption in the immediate and long-term future. The key is to buffer existing EU nationals from personal and professional disruption while working in the United Kingdom.
Conversely, EU companies should consider how to attract talent returning to the continent and helping them to settle into a life back at home or in a new country. Lastly, U.K. employers should reassess their talent management and attraction strategies to ensure they are still competitive in a tightening labor market.
In all likelihood, Brexit poses short-term challenges to employers in need of both lower and highly skilled workers. With adequate planning and consideration for embracing alternative types of work arrangements such as flexible workers, many organizations can effectively navigate this sea change.