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Impact of Brexit on UK recruitment

Gerry Kassab, group chairman of Insight Executive

On 23rd June, the country will vote on whether the UK should stay or exit the European Union. There has been a strong and fear driven debate from both sides trying to gain our votes.

One thing is sure: That an exit will bring about significant change to the country as a whole and in particular to our business communities.

The latest ONS statistical bulletin, UK Labour Market 2016, indicates the number of non-UK nationals from the EU, working in the UK, was a little over 2m or 6.5% of the total working population.

Furthermore, the UK Labour Market 2016 report stated that the most commonly mentioned reason for employers using migrants was that migrants were readily available and the difficulty in attracting UK-born applicants to fill unskilled or semi- skilled roles - even though current UK unemployment rate is running at around 5%.

Other key reasons for employing EU migrants include better work ethic or motivation, better job-specific, practical or technical knowledge and language skills. This reliance on the employment of EU nationals is particularly true in the wider public sector and NHS.

Data from Migration Statistics Quarterly Report from the ONS, published in February 2016, states that, “Nearly half of the growth in employment over the last year was accounted for by foreign nationals.”

Nevertheless, there is a skills shortage being reported across the board. The CIPD has suggested that immigration is having a notable and softening impact on the skills crisis. In particular, the value can be seen in the majority of employers looking to address recruitment difficulties, by recruiting EU nationals and investing in their existing workforce and providing more job opportunities for young people. This has helped reduce unemployment levels and wage inflation – two factors which have contributed to the Bank of England delaying its expected decision on raising UK interest rates.

The likely impact of UK based companies and the recruitment services sector not being able to tap into the EU’s wider workforce pool as a result of Brexit would disturb the current balance and would likely see a rise in the cost of certain types of labour as access to all skill levels become scarcer.

In the short term, this may be beneficial to the recruitment sector as agency fees and interim margins increase in line with a scarcity of labour. In time, finding the right staff will become harder and harder and the extra cost of resourcing these skills might quickly erode the early margin gains and in the longer term may de-stabilise the whole recruitment sector.

Whatever your views on a Brexit and the benefits of the free movement of workers across the EU – one thing is certain, the UK could not survive a sudden loss of over 2m EU workers.

If your business or recruitment agency is dependent upon EU workers, then it would be wise to start to look at the impact of a Brexit and make some sound contingency plans.

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