The Workforce Implications of Post-Brexit

Written by
Karam Filfilan

28 Jul 2016

28 Jul 2016 • by Karam Filfilan

Over 31 million voted in the EU Referendum with 17.5 million people voting to Leave. Many younger workers aged between 18 and 35, an estimated 11 million thought this was an “old person’s vote”.  But this is not quite true since only 35% of this group actually voted.

So what are the HR and workforce implications of Brexit – a decision after four decades for the United Kingdom to leave the European Single Market and its contentious political integration – the European Union.

Clearly the Leave vote in the vast swathe of the Midlands, Northern Britain and the Welsh heartlands was a “protest vote” against the ongoing austerity policies and industrial closures precipitated by the financial crisis of 2008 and subsequent recession coupled with a country-wide concern that jobs were going to migrant workers allowed freedom to the work under European Union legislation. So irrespective of age, this was a “vote” by a huge number of people who feel disengaged or let down by our European or National leaders; a point worth noting in the workplace.    

These were clearly the main issues alongside a desire to free our country from EU political rulings and for Britain to “take back control”.  What does this really mean for HR and the workplace? Rich Veal head of Talent and Reward at GB Willis Towers Watson states “so much is uncertain about what happens next and how things will develop but stepping into the unknown does not mean you should not be prepared. Organisations that will thrive in the new highly dynamic situation will be the ones who pay attention to the things that they can control”. 

Business impact

The Bank of England and many economists have said Brexit will result in a recession but the real question is how deep and for how long. The pound fell to its lowest level for 31 years against the dollar and $2 trillion was wiped off global stock markets; both have now seen a partial recovery but much damage was done. Economic figures published 22 July sent some mixed signals but the Market PMI (Purchasing Managers’ Index which measures output and new orders) and CBI confirmed signs of a slowdown with business and consumer confidence being hit which means people will take a cautious view avoiding significant spend; car sales, white goods and vacations will fall back with other capital goods.

Going forward the workforce impact will vary by sector. Retail, construction, healthcare, hospitality, food processing and agriculture will be hard hit given the EU has been an important source of “necessary labour” such as labourers, seasonal farm workers and nurses. Much too has been written about potential job losses in the Financial Sector some of which is already happening as global banks shift key talents to New York, Frankfurt or Paris but London can still be a dominant force if the “passporting rights” are preserved – this will be a key negotiating point.

As with the financial crises in 2008 and subsequent recession to 2012, most companies will take short-term measures to baton the hatches by delaying major investments, preserving cash, delaying payments and avoiding “discretionary spends” – this usually means cutting back on marketing, external consultancy and, unfortunately, HR expenditure. This could mean recruitment freezes, reduced training costs and limited pay rises for the next 12 to 18 months.

Funding in the public sector will be strained; universities and the NHS are already nervous especially as the availability of much needed European labour maybe restricted.

What should HR being doing?

Richard Veal says “it is imperative that HR helps calm down organisations and provides regular messages and updates as they start to evaluate the repercussions for business here and abroad”. This means that HR departments need to be in a listening mode, providing regular and updated communications with high visibility through maintaining an open door policy. Ben Wilmott, head of Public Policy at the CIPD and Penny Tamkin, director of Employer Research at the Institute of Employment Studies both confirm that they have inundated with members calling to ask “what are organisations saying to their workforce?” Ben’s advice has been “that there needs to be a message of reassurance at this stage. Nothing has fundamentally changed yet and it could take up to two years, possibly longer”.

Tim Thomas of the Engineering Employers Federation goes further EU nationals particularly will want reassurance – responsible employers have provided this quickly by telling them that they are valued workers, that nothing will change quickly and that their employment is secure. In terms of subsequent developments for the UK labour market, it is our expectation that all those workers in the UK before the point at which the UK leaves, (2 years, at least, in the future) will retain their current acquired rights which, in plain English, means the right to live, work and provide services in the UK. There is therefore no need to do anything quickly.”

With no clear exit strategy, the reality of course is that it is difficult for business leaders to saying anything which is really tangible. However early indications from CIPD, IES and EEF members is that they are adopting a ‘wait and see’ stance – rather than immediate knee jerk decisions. What we do know though is that business does not like uncertainty and will clearly factor perceived risks into planning. This means that any reaction is likely to come further down the line.

My guess is that there will be no significant changes in the next six months. The new Conservative Government under Theresa May should announce a number of infrastructure or public sector deals to signal Britain is open for business but many of these have been long in queue anyway.

So here are three actions that HR needs to do now:

1. Ensure leaders and HR communicate face to face regularly and honestly to their workers to maintain positive engagement. The workforce needs reassurance that it is highly valued and is the important source of competitive advantage. Penny Tamkin of the IES points to the danger is that middle management in particular might feel isolated as the first point of workforce questions yet they are a crucial source of upward feedback. HR needs to ensure senior and middle management stay on task by being available, visible and actively listening to establish key themes and the strength of feelings.

2. In particular it is important to reinforce corporate values especially around respect and diversity. EU workers in the UK and UK Nationals in Europe will be nervous that the chosen country of work might not feel quite so welcoming as before. In this period of uncertainty, anger, frustration and victimisation might surface. This will be an emotional time and employees will need both time and space especially if EU workers in the UK feel less welcome than before. Similarly UK nationals abroad might also feel more anxious about the future. 

3. Undertake workforce analytics. It is imperative that organisations identify critical roles and their key talents so they have a clear picture of their current workforce. Notably HR needs to identify the extent and potential impact of key groups analysing the workforce by age and length of service, by skill / competency categories and by location. Younger knowledge workers often in their first job as a graduate or an intern may feel particularly vulnerable. Some have already been told to consider relocation or redundancy. This may have further consequences for partners or family relationships. But others might see these as future career opportunities. Reactions will therefore depend on personal circumstances but again individuals will need time. Now Britain has got back to work, some of the initial, myopic reactions have calmed but the economic waters are still choppy and will remain so for some time.