Brexit – the end to freedom of movement: Which sectors will lose out?

Posted in Employment and labour UK and EU legal framework

Following the UK’s exit from the EU and the end of any relevant transition period, the freedom of movement of people within the EU will cease and the terms of movement of people within the EU is subject to change depending on the agreed terms of exit. This could have a significant impact on sectors who are heavily reliant on employing low-skilled workers from the EU.

For EU citizens already in the UK prior to 29 March 2019, or those who enter before the end of the transition period (assuming there is one) i.e. 29 March 2018 to 31 December 2020 (assuming it is not extended) during which period free movement will continue, the UK Government has proposed a settled status and pre-settled status scheme (the EU Settlement Scheme). This has already been rolled out on a trial basis from 28 August 2018 and will be rolled out more widely towards the end of the year, with the hope of it being fully open by 30 March 2019.  Under the EU Settlement Scheme, EU citizens (and their families) will be able to apply to get either settled or pre-settled status. This will mean they can continue living and working in the UK after December 2020. 

As it stands, for EU citizens and their families seeking to enter the UK from 1 January 2021, there will be a new immigration system which will control how EU nationals and their family members visit, live and work in the UK.

The details on the new immigration rules are still unconfirmed. The Migration Advisory Committee (MAC) has published its report on EEA migration in the UK and the Prime Minister has indicated that she will follow its recommendations.    The report claims that EEA immigration as a whole has had neither the large negative effects claimed by some nor the clear benefits claimed by others.  However, it proposes that there are ways that the migration policy could be changed in the UK to increase the benefits and reduce the costs.  How the migration policy will proceed will depend on whether immigration is a part of the negotiations within the EU or not.  This is something that the MAC cannot advise on.  However the proposals set out in the report are based on the assumption that immigration is not a part of the negotiations and that preferential access to the UK for EU citizens and their families will cease after the transition period.

Low Skilled Workers

Pursuant to the current points based system, employers cannot sponsor low skilled workers (the MAC says because there has been a sufficient supply from within the EEA). Whilst acknowledging that their recommendation may be strongly opposed by affected sectors who will argue they will face a cliff edge in their supply of labour, with regard to low-skilled workers following the transition period, the MAC does not suggest any new work migration route for low-skilled workers, with the possible exception of a seasonal agricultural workers scheme. The MAC states that such a scheme is separate from every other labour market because 99% of seasonal agricultural workers are from EU countries and the gap cannot realistically be filled by domestic workers.  However, other sectors such as the construction industry, the care sector and the hospitality industry have suggested that they too will encounter a shortage of workers, with those remaining under the EU Settlement Scheme or domestic workers not being currently able to cover the shortfall.  The fundamental issue for such sectors is that the MAC believe that the UK should focus on higher-skilled migration, coupled with a more restrictive policy on lower-skilled migration in the design of the post-Brexit system, acknowledging that any changes to the UK’s migration system will create winners and losers.  The risk exists that these industries will be ‘losers’.    

The MAC report suggests that in certain sectors the existing stock of low-skilled migrants and those who arrive on family visas will be able to take up the burden caused by no lower-skilled migration route to the UK. The other alternatives suggested by the MAC would be for the Government to extend the Tier 5 (Youth Mobility) visa to deal with a sector-specific shortage.  This  presently allows young adults aged 18 – 30 from a limited number of countries to work in the UK for up to two years. However, this effectively replaces free movement with another type of free movement and in view of the Government’s aim to reduce net immigration; this may not be palatable and is not a solution to the migration requirements.

Another area is the effect that this may have on other workers. The Department of Health has warned that a shortage of workers in the care industry could have a knock on effect on women’s participation in the workforce as they move out of paid employment to take on informal care roles.

What about higher skilled workers?

The MAC report said it wants freer migration for highly skilled workers than for lower skilled workers. It also states that the current Tier 2 system in the points based immigration scheme, through which most non EEA workers access the UK, could be lowered to medium skilled jobs (Regulated Qualifications Framework (RQF) level 3 and above).  However, it does suggest that the salary level for Tier 2 entrants should not be lowered (i.e. will remain at £30,000).  The report does suggest that the cap on Tier 2 entrants should be abolished, but this needs to be reconciled with the Government’s policy to reduce annual net migration to less than 100,000.  The report also recommends the abolition of the Resident Labour Market Test (RLMT) or at least to amend the test to reduce the level of the higher earner exemption.  The RLMT requires employers to advertise a job to the settled workforce for four weeks before they can sponsor a skilled migrant. It is seen by many as simply a tick box exercise.  Whilst some would have preferred the proposals for change to go further (such as introducing more regional variations to the Tier 2 (General) scheme), the actual proposals may not even be possible if immigration becomes part of the Brexit negotiations and the UK does not have a free hand in determining migration policy.  

What steps should employers in the affected sectors be taking?

What happens if the industry sectors are not able to cover this shortfall in workers? This may mean that contractors on projects find themselves unable to perform the contract effectively.  In that situation, in the same way as companies should be considering “Brexit clauses” to cover such matters as changes to tariffs or delays in goods from the EU entering the UK, they should include a provision relating to what will happen if there is a shortfall in the workforce. The Brexit clause should specify what will happen should the contractor be unable to perform the contract (i.e. will there be a renegotiation of the terms of termination of the contract).  It will also be important to clearly define what amounts to a shortfall in the workforce and what steps the contractor or company has taken to cover any shortfall.

Of course, companies must start thinking now about ways of avoiding a shortfall in their workforces, notably as the effects of the referendum and the implications of Brexit (as well as other factors such as the lower value of the pound) are already biting, with net migration from the EU to the UK steadily falling to their lowest levels in recent years, suggesting that the allure of the UK for EU migrants has already declined considerably.

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