UK Business Confidence Bounces Back From Brexit, but Employees Remain Nervous

Mark Eltringham at Workplace Insight flags a new UK survey showing that business confidence, at least in the service sector, has largely recovered from the deep dive it took in the aftermath of June’s Brexit referendum:

Following its dramatic fall in the immediate aftermath of the Brexit vote in July, business confidence in the UK’s service sector rebounded in similarly spectacular fashion in August according to the Markit/CIPS UK Services PMI survey. The August study found that services output and new order levels both rose. The Markit/CIPS UK Services Business Activity Index, where readings above 50 signal growth, was 52.9 in August, compared with 47.4 in July, representing a record month-on-month increase. This follows a record drop on 4.9 points in July to a 7 year low. New business increased in August at the fastest rate in four months. Job creation, new clients, more export business linked to the weak pound, higher domestic tourism and returning confidence following disruption from the Brexit vote, were all linked to increasing demand, according to the survey.

David Noble, CIPS group chief executive struck a note of caution in saying: “Business optimism ricocheted back to pre-Brexit levels, reassured by market stability and clients bringing dormant projects back to life. Whether this steadiness continues will largely depend on the sector’s reaction to the UK government’s approach to the Brexit negotiations as the sector keeps one eye on business as usual and one eye on possible obstacles ahead.”

So far, however, the approach the government will take has been difficult to ascertain, with officials giving vague and sometimes contradictory signals about what sort of immigration system it will seek for European citizens once Britain exits the EU, in addition to whether the UK will remain part of the union’s single market or forge a separate trade deal.

Uncertainty, in other words, remains high, especially for those citizens of EU countries already living and working in the UK. Another new survey from the British Chambers of Commerce finds that 41 percent of UK businesses have heard concerns from European employees about their future right to work in the country, Georgi Gyton notes at the CIPD:

Five per cent of organisations experienced resignations from EU employees in the month following the referendum on EU membership, while 10 per cent reported that some workers had signalled their intention to leave the UK, according to the poll of more than 800 organisations.

The BCC said the loss of EU nationals from the workforce would hamper businesses at a time when many are already reporting recruitment difficulties. It called on the government to provide immediate certainty for those affected, and said organisations also required more information on their ability to hire EU nationals before the country leaves the union. Sixty per cent of those surveyed said residency guarantees would have a positive impact on their business, compared to 28 per cent that felt they would have no impact.

Yet another survey from Willis Towers Watson, of senior HR and rewards executives in Europe and the US, finds that most organizations have yet to make a plan for how to respond to Brexit, while many more see it as a threat than as an opportunity:

Half of organisations see Brexit as a threat, while only 15% see it as an opportunity. The remaining 35% see it as more or less neutral, which may reflect uncertainty about what is likely to happen. A large portion (56%), of businesses will wait and see before deciding what to do, while only 26% so far are planning to take action. …

Almost four-fifths of companies have begun a broad consideration of the implications of Brexit and more than half have conducted an assessment of what it means for key areas, but so far only 24% have carried out a detailed impact assessment and only a third have done any scenario planning. The most scenario planning was seen in financial services (carried out by 45% of companies) and the least in technology, media and telecoms (20%).

To help UK organizations grapple with the uncertain future of their European employees, Qian Mou, employment law editor at XpertHR, provides a quick checklist at Personnel Today. One key reminder: Even if those employees eventually lose their right to work in the UK, for now, employers should not make recruiting or retention decisions based on that assumption:

Employers are not permitted to discriminate against employees or job candidates on the basis of nationality, including during the recruitment process. This means that they should not consider an applicant’s EEA nationality during the hiring process, except to check that he or she has the right to work in the UK. Most EEA workers have the right to work in the UK without special permission and, although there has been much speculation, there has not been any change to these rights. Therefore, any less favourable treatment of a job candidate because of his or her EEA nationality could be considered discriminatory.

Employers should also ensure that they do not treat current employees unfavourably due to EEA nationality, for example when considering employees for renewal of fixed-term contracts, promotions, assignments or allocation of shifts.