Brexit Extension Is No Relief for UK Employers

Brexit Extension Is No Relief for UK Employers

Business leaders in the UK may have breathed a sigh of relief last month when the country’s deadline for leaving the EU, originally scheduled for March 29, was pushed back until October 31. The extension is good news insofar as it gives the UK government more time to finalize an agreeable Brexit plan and avoid crashing out of the union, with potentially devastating economic consequences. Likewise, it gives British organizations more time to shore up their own Brexit plans, if they had not done so already. For these organizations, however, and particularly for their HR functions, the extended Brexit deadline is a decidedly mixed blessing, and it would be a mistake to treat it as a reprieve.

One of the most disruptive effects Brexit has had on the UK for nearly three years now has been to introduce major uncertainty into the business environment. Not knowing whether, or when, or how Brexit would finally happen has made it difficult for organizations to make long-term plans that depend on the outcome of this process. It would be one thing if the UK and the EU had decided that Brexit would definitely take place at the end of October, under a finalized deal and with a specified transition plan. The extension agreed upon in April did none of that; instead, it gave the UK government another six months to try and accomplish what it has been unable to do thus far and rally majority support in Parliament around either the deal Prime Minister Theresa May made with her European counterparts last year, or some alternative arrangement that the EU would also accept.

In other words, the uncertain environment that has prevailed since 2016 remains in place: Organizations still don’t know when Brexit will happen and whether it will be orderly or chaotic. As Steve Hawkes, deputy political editor at the Sun, remarked when the extension was announced, another six months of unpredictability “is possibly the worst outcome for business.”

If the UK ratifies the Brexit deal before October, the UK may leave the EU at the start of the following month. If the country fails to hold elections to the European Parliament at the end of this month, it will crash out with no deal on June 1. If Parliament still can’t pass a deal by the new deadline, the country faces the prospect of a no-deal Brexit in November or an additional extension, assuming the EU is willing to grant one. The delay has even amplified uncertainty around whether it will ultimately happen at all, though the government remains committed to achieving Brexit — and organizations must continue preparing for it.

To that end, businesses in the UK cannot afford to slow down their contingency planning for the various Brexit scenarios that may come in the next six months. This is especially true for HR, as Brexit’s impact on workforce planning, retention, and employee engagement are some of its most significant consequences for organizations. While the overall picture of the future remains cloudy, there are a few things of which HR leaders can be sure, at least in terms of what risks they need to plan against. Here are some things UK businesses should be thinking about as they move ahead with their post-Brexit talent strategies:

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With Brexit Uncertainty Looming, UK Businesses and Employees Lose Confidence in Economy

With Brexit Uncertainty Looming, UK Businesses and Employees Lose Confidence in Economy

The deadline for the UK to withdraw from the European Union is coming up in just two weeks, on March 29. This week, the UK Parliament voted against a deal negotiated between Prime Minister Theresa May’s government and EU leaders, against a no-deal Brexit, and in favor of delaying the Brexit date in order to buy additional time to figure out a solution. Any delay will require the consent of the 27 remaining EU countries, which is not guaranteed, and even with more time, legislators will still face the same tough choices.

As the clock counts down to the deadline, Brexit has created a lot of uncertainty for UK organizations and their employees, especially workers from other EU countries whose future status is up in the air. This uncertainty has done significant damage to UK employees’ confidence in the business environment, Gartner’s latest Global Talent Monitor report indicates:

Employee confidence in the UK business environment has slumped, according to Gartner, Inc. The latest data in Gartner’s Global Talent Monitor report for 4Q18 shows employee confidence in near-term business conditions and long-term economic prospects reaching an index score of 55.6, a decline of 7.5 per cent from an index score of 60.09 in 3Q18. These results follow a worldwide trend that has seen global business confidence sink to its lowest point since the fourth quarter of 2017.

This lapse in confidence was paired with a sharp decline in employees’ active job seeking behavior, which fell by 7.2 per cent from 3Q18. Amid declining perceptions of the job market, coupled with the highly uncertain Brexit outlook, employees’ intent to stay in their current jobs in 4Q18 increased for the first time in 2018, as did their willingness to go above and beyond in their present roles.

UK employers are staring down the uncertainty of Brexit in the context of a tight talent market in which it has become exceptionally challenging to fill critical skills gaps. The Global Talent Monitor data from the final quarter of last year suggests that talent attraction will be a major challenge for employers this year, regardless of what happens with Brexit, as employees take a more pessimistic view of the job market and become more averse to the risks inherent in changing jobs. (Gartner for HR Leaders clients can see all the latest data from our Global Talent Monitor here.)

Uncertainty is a key factor — perhaps the key factor — driving the Brexit panic, as illustrated by the Decision Maker Panel, a survey of 7,500 UK business executives that researchers from the Bank of England, University of Nottingham, and Stanford University have been running regularly to gauge the impact of Brexit on companies. Writing at the Harvard Business Review, the researchers ascribe declines in investment, employment, and productivity to Brexit-related uncertainty:

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