- Category: UK-Brexit
The impact of Brexit on workforces
If necessary, the UK will leave the EU without a proper agreement. Ever since Theresa May confirmed that she was willing to adopt a hard Brexit in 2017, companies have been extremely worried. For the CEO of a company specialized in teaching other languages, “a Brexit without a proper commercial agreement with the EU would seriously handicap our activity”. It makes sense. After all, not only do his clients have to be interested in traveling abroad, but his employees mostly come from other European countries. With a hard Brexit, he’ll have a hard time finding French, Spanish, or German teachers: he won’t find workforce.
A few months ago, specialists at Coface (an insurance firm) studied this matter. Their conclusion: no matter what terms Brexit end up having, and even if investors are granted significant benefits, British companies will be less attractive in the coming years. Granted, since the vote in 2016, companies have been surprisingly resilient. For example, in the last quarter of 2016, they managed to set a new record for overall profits. However, this can be deceiving: the fact is, 75% of SMEs find it hard to attract investment, and just a few days ago, the CEO of Jaguar Land Rover warned that Brexit might cost 80 billion pounds of investment.
Bad news for consumers
According to estimates, this is probably only going to get worse in the coming months. Indeed, Brexit has made the pound lose value, hitting its lowest point of $1.21 at the beginning of 2017; and as a result, importations have been more expensive. Not to mention, the UK has had an inflation rate of around 3% since 2017, when wages haven’t grown as fast. As such, purchasing power is dwindling, which is obviously bad news for any company looking to sell its products.
However, Brexit hasn’t happened yet, so the biggest concern remains the immigration policy. Indeed, today, immigrants represent almost 12% of the working population in the UK. If immigration from the EU is limited because of Brexit, this could have a lasting impact on the workforce; some estimates predict that this, alone, will cause economic growth to drop by 0.6 percentage points.
How will SMEs be able to deal with this? Unless they manage to change their business model, the lack of customers and workforce might cause the smallest or most fragile companies to disappear. As for the larger SMEs, they’re already considering moving Ireland, Germany, or France.
Though, keep in mind, the British government probably will take this chance to pass a few bills to make is territory more attractive. Lowering corporate tax from 20% to 17%, for example…