Businesses sound the alarm over Brexit as negotiations get under way ⁰

The end of free movement of people from the EU will damage UK businesses and public service delivery unless post Brexit immigration policies take account of the need for both skilled and unskilled labour from the EU. This is a key message in new research from the CIPD, the professional body for HR and people development, and the National Institute of Economic and Social Research (NIESR). It also calls on businesses to broaden their recruitment and people development strategies to ensure they are doing all they can to attract and develop UK born workers, and highlights the need for significant changes to Government skills policy. The study joins a growing chorus of business leaders appealing for a rational approach to Brexit negotiations. Britain’s top business lobby groups have already come together to demand open-ended access to the European single market for as long as it takes to seal a final Brexit deal.

The CIPD /NIESR research, Facing the future: tackling labour and skills shortages post-Brexit, analyses employers’ perspectives on migration restrictions following the end of free movement and is based on a survey of more than 1,000 organisations, employer focus groups held around the UK and in-depth interviews with HR leaders.

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According to the study, the main reason employers recruit EU nationals is because they cannot fill low or semi-skilled jobs with UK-born applicants, cited by 35 percent of low-wage industry firms. The report found that 25 percent of organisations say a requirement for a job offer for EU migrants would have a negative impact on them, one in ten (11 percent) of businesses say the number of EU nationals they have recruited since Brexit has decreased and 1 in 5 organisations say they are considering relocating all or part of their UK operations outside the UK (11 percent) or will focus future growth outside the UK (9 percent).

Peter Cheese, Chief Executive of the CIPD, commented: “Access to skilled and un-skilled labour is a huge concern for employers. If the Government does not provide a straightforward, flexible and affordable immigration system for EU nationals post Brexit, as set out in our recommendations, significant numbers of employers are likely to face real skill shortages which may hold back their growth and performance. With the Brexit negotiations starting this week, there is still little clarity on the immigration system that the UK will adopt after Brexit. An overly blinkered approach focused on simply cutting immigration to tens of thousands and focusing only on high skilled employees could leave employers high and dry, especially those who rely more on EU migrants to fill low-skilled jobs. The Government must therefore consult far more widely about their plans and invite employers to play a key role in shaping the future of UK immigration policy to ensure it works for businesses and the economy. Our research also suggests that while Brexit will encourage some employers to work harder to recruit local candidates and people from under-represented groups in the UK, many employers are already working to build links with schools, provide apprenticeships and invest in training and yet are unable to find the skills and people they need.”

The qualitative research from the focus groups and case study interviews reveals many employers have difficulty attracting sufficient UK nationals to work in low paid and low-skilled jobs particularly where hours are anti-social or the work environment challenging – especially in regions such as the East Midlands and South West of England.  This is despite offering higher pay and investing in the skills of the workforce in some cases.  However employers in low paid sectors such as retail and hospitality are more likely to report they employ EU migrants because they have lower expectations around pay and employment conditions (15%) than the all employer average in the survey (7%).

Heather Rolfe, Associate Research Director at NIESR stated that: “Our research adds further weight to evidence that employers don’t recruit EU migrants in preference to British workers, but because they attract too few British applicants. Ideally, many employers would like to recruit more young people but working in a meat factory or a care home is not top of the list for school leavers now, and never has been. It would be very unwise indeed for the Government to end free movement without putting in place new policies which enable employers to meet their needs for lower skilled labour. Our key sectors and services will suffer damage if policies to replace free movement are introduced in haste and are costly, complex and bureaucratic.”

The report recommends that future immigration policy to replace free movement must be:

Straightforward:

• New policies for EU nationals should be aligned as closely as possible with the existing points based system for non EU nationals
• Government should avoid introducing a complex array of sector or regional based immigration policies which could lead to disparities and unfairness
• Any changes to immigration policy for EU citizens should be introduced at the end of a three-year transitional period once negotiations are completed

Flexible:

• Government should review and expand the labour shortage occupation list for EU nationals to include jobs at lower levels of skills and salary where there is evidence that labour shortages are difficult address and damaging to employers
• Government should review the Resident Labour Market Test and make it more appropriate for employers facing damaging labour shortages by reducing the requirement to advertise jobs through Job Centre Plus from 28 to 14 days
• The Youth Mobility Scheme should be extended to all 18-30 year old EU migrants and EU students with a bachelor’s degree or above should be allowed to remain in the UK, without requiring a job, for two years

Affordable:

• In applying the existing points-based system for non EU workers to EU workers, Government should halve the sponsorship licence fee for public sector employers and review the other costs that employers are subject to, for example the health surcharge, the skills levy and the fee to for every non-EU national they employ.

Meanwhile, according to a report in The Sunday Times, a coalition of associations representing some 400,000 businesses have written to business secretary Greg Clark, urging the government “to put the economy first” ahead of the start of Brexit talks in Brussels tomorrow. The letter, from the CBI, British Chambers of Commerce, manufacturers’ group EEF, the Federation of Small Businesses and the Institute of Directors says a transitional deal should “maintain the economic benefits of the single market and the customs union until a final settlement between the United Kingdom and the European Union is agreed and implemented”. The five groups also call for a final deal that allows for tariff-free goods trade, minimal customs checks, mutual recognition of standards and regulations, and a “flexible” system of movement of labour between Britain and the EU.

As long as Britain remains in the single market and the customs union, it is likely the government will have to accept freedom of movement, and would be unable to sign new trade deals with non-EU countries. A transition period that preserves the status quo as closely as possible would avoid “multiple disruptions” for business, according to BCC director-general Adam Marshall. The letter also repeats calls for the government to prioritise guaranteeing the rights of EU citizens already in the UK, echoing the concerns expressed in the CIPD / NIESR study.