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Risk in Context

Human Capital Risk and Brexit

Posted by Darren Holmes 27 March 2019

The uncertainty that organisations face from various Brexit scenarios extends into their workforce strategy, particularly around talent availability. The resource issue is especially significant in such sectors as agriculture, construction, education, health care, hospitality and leisure, and retail which all rely heavily on migrant workers. 

Workplace Rights Face Minimal Impact

According to UK government guidance papers, workplace rights will see relatively few changes following Brexit, even a "no-deal" Brexit: “In a ‘no deal’ scenario, there are no expected financial implications or impacts for citizens or businesses operating in the UK (whether UK or EU-based) in regard to workplace rights.

That is not to say companies can ignore the issue. For example, employees working in an EU country will need to check whether they are protected post-Brexit under national guarantee where they work.  Similarly, companies with European Works Councils and affected trade unions should review the agreements following a “no-deal” Brexit.

Managing Brexit Human Capital Risk

Not as clear cut are the human capital impacts Brexit will have on overall business strategy, such as potential worker shortages. Already, the flow or workers from the EU has slowed — in the last quarter of 2018, the number of EU nationals working in the UK dropped by 61,000, according to the Office for National Statistics, although there was a rise of 130,000 from non-EU countries.

Some EU workers are anxious about the impact of Brexit and are opting to leave the UK. If such workers prove difficult or more expensive to replace, organisations could face declining numbers of employees, possibly affecting the ability to run parts of a business or to take on or complete projects, which could have a negative impact on revenues. The construction industry, for example, employs an estimated 165,000 EU nationals. In a recent report, the Construction Leadership Council said: “[T]he reality is that a ‘No Deal’ Brexit will generate uncertainty and may make it less likely that EU workers already in our sector will want to stay here in the UK.”

Communication with employees is especially important in times of uncertainty. Organisations should be working with their EU employees to understand options under possible Brexit scenarios, and help them navigate official channels to achieve “settled status,” if applicable and desired.

Human resource departments should also be in close communication with other areas of the organisation to monitor staffing levels and adapt recruiting efforts.

Among the many questions companies need to consider:

  • In what areas would a skills shortage affect us? Would we be forced to pay higher wages for available talent?
  • Would we be affected by a skills shortage outside of our organisation, for example, in parts of our supply chain?
  • Will it be necessary and feasible to train lower skilled workers to take on jobs with higher skill levels? At what cost?
  • For UK-based international organisations, what are the potential regulatory challenges across multiple countries?
  • With a UK exit from the EU, how will we maintain calibration of health and safety standards across the EU? Or will this even be required?

Having a strategy in place ahead of time will be a key differentiator for companies as they compete for talent.

Darren Holmes

Senior Vice President