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Brexit’s impact on employment – 3 trends all UK businesses need to know

Brexit has happened and the job market is about to change forever. Brexit’s impact on employment in the UK is potentially detrimental for any businesses in the country.

This makes staying up to date with any potential changes in the job market extremely important. In this Pacific Prime UK blog, we will explore three post-Brexit trends that all UK businesses need to know.

Brexit: What’s going to happen?

On the 31st of January 2020, the UK made its official departure from the EU. However, the UK’s job market is still deeply interconnected with the EU’s, at least for the next 11 months.

Here’s why

For the next 11 months, the UK will:

  • Still remain fully integrated with the EU single market.
  • British nationals will still be able to travel around the EU, even if they are no longer considered EU citizens.
  • The UK will still be bound by all EU laws.

But as London and Brussels continue negotiating the terms of Brexit, three employment trends emerge in the UK:

  1. Heightened competition to recruit EU migrant workers.
  2. Looming uncertainty in the job market continues.
  3. Workforce planning will become more important than ever.

With that said, let’s dig deeper and find out what these three post-Brexit trends mean for all UK businesses.

1. Heightened competition to recruit EU migrant workers

Even if the UK’s economy has been rocked by Brexit since 2016, the overall demand for EU migrant workers remains high, according to the Chartered Institute of Personnel and Development (CIPD).

However, Brexit’s impact on employment in the UK economy has discouraged many EU citizens from coming to find work in Britain. This has resulted in growing recruitment difficulties due to lack of talent in the job market.

These three findings by the CIPD’s Labour Market Outlook 2019 suggest that the entry of EU migrant workers is being outpaced by employment growth in recent years:

  1. From 2017 to 2019, the share of organisations reporting hard-to-fill vacancies increased from 56% to 61%.
  2. In 2018, two-thirds of organisations said they would continue recruiting EU nationals.
  3. UK employers cited the inability to find domestic applicants as the main reason why they would continue recruiting EU migrant workers for semi-skilled or unskilled jobs.

The tightened job market will lead to higher competition between UK employers to recruit EU migrant workers. The competition will, in turn, put an upward pressure on the wages of many workers.

For instance, the UK saw employee annual average pay increase by 3.9% (excluding bonuses) in mid-2019, the highest rate of increase in a decade.

CIPD’s survey found that 31% of all employers cited recruitment and retention issues as the most significant factor for increasing payment to employees.

Strategies for employers

The heightened recruitment competition will require UK employers to separate themselves from their competitors in order to attract the best talent.

Here are three strategies that employers can implement to attract more talent in 2020 and onwards:

  • Budget adjustment: EU migrant workers recognise that the skills they bring to the UK are in demand. To attract and retain employees, UK firms will have to make budget adjustments in advance so that they are able to offer competitive salaries to attract and retain EU employees in the long-run.
  • Improve employee benefits: Employee benefits like group health insurance will be a key factor that will allow UK firms to compete in the job market after Brexit. This is especially the case for high-skilled EU migrant workers, who will benefit from a private health insurance policy in the UK.
  • Implement non-financial benefits: Investing more in non-financial benefits such as a larger dedicated training budget or a company gym membership can make the difference between your EU employee staying and leaving.

2. Looming uncertainty in the job market continues

Most UK businesses hoped that after the UK had officially left the EU, there would be more certainty in the country’s job market.

However, the opposite seems to be happening. Uncertainty has continued, especially for low-skilled migrant workers.

Low-skilled migrant workers could be shunned from entering the country

The UK government recently announced a plan to tighten the requirements for foreign low-skilled workers planning to migrate to the UK.

Particularly, the new immigration system will require any incoming migrant worker to be able to speak English.

Other notable policy changes include:

  • A job offer with a salary threshold of GBP £25,600 (with exceptions of GBP £20,480 for certain jobs).
  • Border control will no longer accept ID cards from countries such as France and Italy.
  • There will be no entry route for self-employed people coming into the UK.

These changes will be implemented in January 2021, throwing many UK businesses into uncertain waters as to how they are going to replace their low-skilled workforces in the next 12 months.

For example, The Scottish Seafood Association and Scottish Salmon Producers Organisation highlighted how the seafood processing sector heavily relies on overseas labour and will be severely impacted by this post-Brexit decision.

Strategies for employers

As the Brexit uncertainty continues to loom over the country, effective communication and support are key. Companies need to reassure their employees that they are following the situation closely, letting employees know of any contingency plans that have been prepared.

Support for employees could include:

  • Educational sessions to let employees know about Brexit’s latest updates and how it may affect them.
  • Consultation sessions for all migrant workers in the company seeking advice regarding Brexit.

3. Workforce planning will become more important than ever

As the scarcity of labour will become more acute after Brexit, advanced workforce planning must become a core business strategy for all UK firms.

Workforce planning will allow UK businesses to access the level of urgency facing their workforce situation. They will be able to perform risk assessments, depending on the Brexit scenarios and make strategic decisions on the appropriate contingency plan.

For example, CIPD’s research found that 10% of employers have decided to transfer part of their operations outside the UK. This will allow companies to mitigate risks associated with labour shortage in the country while still maintaining their presence in the UK market.

Coping with Brexit’s impact on employment in the UK

The workforce scarcity and job market uncertainty call for a proactive approach from businesses.

Maximising employee retention rate is key to long-term growth and investing in employee benefits is instrumental to achieve that goal.

Pacific Prime is strategically positioned to offer valuable advice on employee benefits, particularly in expat health insurance in the UK. Contact our team today for a free consultation session on securing the most cost-effective plans for your business or visit our website for a no-obligation, free quote today.

Content Creator at Pacific Prime Singapore
Phuwit is a content writer who helps inform readers on insurance-related issues through writing articles, blogs, and more. Phuwit strives to produce quality content that makes insurance easier to understand for readers.

In his free time, Phuwit enjoys reading and playing badminton. He also loves a good cup of coffee.