On June 23, British citizens will vote in a referendum to decide whether the UK should remain part of the European Union. At this point, neither the likely outcome of the vote (polls are currently split) nor its implications are known. Predictions of the economic impact of a so-called “Brexit” (“British exit” from the EU) range from the UK Treasury’s assertion that GDP may be 6.2 percent lower by 2030 to the OECD’s belief that it would lower UK incomes by one month’s salary by 2020, to boosters’ belief that it would help Great Britain by, among other things, increasing its ability to negotiate favorable trade deals.
For organizations based or operating in either the UK or the EU, there are multiple potential workforce risks to Brexit, mainly because it could considerably curtail the free movement of labor, and because much of the UK’s current employment law is based on EU law.
Freedom of movement is a key principle of the European Union, and one that results in more than 2.1 million EU citizens working in the UK. The re-imposition of stricter border controls could exacerbate skill shortages in many sectors, which is one reason why some major British employers have been coming out against Brexit, as the Telegraph reports:
A vote for Brexit would plunge Britain’s engineering industry into “crisis” by cutting off vital research funding and exacerbating a 1.82m shortage in skilled workers an influential consortium of industry giants warn today. Rolls-Royce, Airbus and Caterpillar have joined a chorus of British companies in a bid to avoid “unknown and unquantifiable transition risks” to the £455.6bn sector should voters opt to leave the European Union.
Writing to The Sunday Telegraph, Naomi Climer, president of the Institution of Engineering and Technology, a trade body with 167,000 members, said: “British engineering is deeply integrated with global markets and companies. If Britain votes to leave the EU, the period of uncertainty about the terms on which access to these markets would be granted would be a threat to the sector.”
In general, big business in the UK is largely pro-Europe and, from a workforce perspective, is concerned about skill shortages and increased wages, more costly recruitment strategies, and even employee engagement issues if the UK is no longer considered a welcome place to work. It’s not just British businesses—multinational companies like Goldman Sachs, which has been investing heavily in London, may be affected because of their inability to centralize European offices.
For Europe as a whole, the result may be less labor market dynamism—in other words, the exact opposite of what it vitally needs.
One of the most remarkable geographic findings in our recent datasets is the lack of labor market and business dynamism in Europe, which is all the more remarkable given the overall global slowdown in business. In our careers research, for example, we found that tenure in role increased 38 percent since 2010 in Europe—more than any other region.
If you’re an HR leader in the UK, here are some concrete steps you can take to mitigate the talent risks of Brexit:
- Identify current and future talent that is at risk: Conduct a talent audit to determine which staff are at risk (i.e., those with non-UK passports) and their level of criticality to the organization (whether in terms of their skills or their roles). Bring forward talent strategy conversations about future needs to ensure that the organization has a plan for skills that are going to be critical in the future but may be difficult to source after Brexit.
- Evaluate potential new sources for recruitment: Identify new, non-traditional pools of talent to fill the gaps left by European workers who are no longer easy to hire.
- Put pressure on hiring managers to alter their requests based on the new market realities: With more narrow pools from which to recruit, recruiters need to start challenging hiring manager assumptions about needs so organizations don’t waste effort looking for candidates that don’t exit. Ultimately, this might mean more on-the-job training or thinking about hiring at the portfolio level, as opposed to the individual level.
- Create employee engagement plans: Clearly communicate to employees their value to the organization and their mission, while also being clear about the changes the organization is being forced to make and their implications for employees.
Hopefully, the referendum will result in the UK remaining fully integrated within the European economy, but if Brexit does pass, those who have planned for it will have a competitive advantage. Even if it doesn’t, these activities are vital to mitigating risk in an environment of weak labor market dynamism and skill shortages, so strategic planning is likely to pay off either way.