Free movement of labour and people – or immigration – was one of the most debated issues during the UK referendum campaign.

Brexit Task Force

The different choice of words which defined the Remain and Leave campaigns may be seen as more of a PR exercise, but for anybody trying to forecast what might happen in the months and years of negotiations to follow, the distinction is important to understand. It matters for the simple reason that how the UK Government positions itself on this issue will be critical for its negotiating stance and equally to the response that follows from the EU.

Those who argued for the UK to ‘take back control’ of immigration believe that they won the argument and that the free movement of labour and people – which they believe is equivalent to ‘uncontrolled’ immigration – is not compatible with the new relationship that follows with Brussels. In her speech at Conservative Party Conference earlier this month, Prime Minister Theresa May captured this mind set when she said: “We are not leaving the European Union only to give up control of immigration again.”’ In that speech, May said ‘immigration’ alongside ‘control’ on four separate occasions, but did not once mention the free movement of people and labour. Based on this marker in the sand, it is safe to assume that the UK Government does not intend for free movement of labour and people – one of the four pillars of the UK’s current relationship with the EU – to be included in any new arrangement.

However, in the same speech May said: “I want that deal to reflect the kind of mature, cooperative relationship that close friends and allies enjoy… I want it to involve free trade, in goods and services. I want it to give British companies the maximum freedom to trade with and operate in the Single Market – and let European businesses do the same here.”

Unfortunately, there are many in Brussels and other European capitals who believe it is not possible for the UK to remove one of the pillars of the EU’s architecture without the risk of the whole thing eventually collapsing. German Chancellor Angela Merkel, for example, has said that full access to the single market is not possible without accepting the free movement of people. Guy Verhofstadt, the European Parliament’s chief Brexit negotiator, has stated that “For everybody in the European Parliament, the four so-called fundamental freedoms that underpin the Union are key and you cannot start to make a distinction between them and to split them.”

With British and European politicians seeing the debate in very different ways it is difficult to predict the model of a future relationship between the EU and the UK. Possible scenarios include the following:

If the UK becomes member of the European Economic Area (EEA), it will not be allowed to set any limitations to the free movement of labour.

If the UK decides to have bilateral close cooperation, similar to Switzerland, it will enjoy more freedom, but will still be obliged to allow the free movement of EU citizens.

If the UK and the EU establish a free trade agreement without provisions on free movement of labour, then the inflow of low-skilled labour could drop to close to nil. There should be a higher inflow in high-skilled labour.

Last week there was further evidence to suggest May’s response is in line with the UK public mood, and therefore unlikely to change. A poll published on 25 October and conducted by Survation Ltd for the British broadcaster ITV found that Britons are more worried about preventing an ‘influx of foreigners’ than losing EU trade benefits.

However, many employers are concerned about the impact a hard line could have on their ability to recruit and retain talent. In response, the Prime Minister has said that she does not want to ‘exclude the brightest and the best’ from coming to the UK, and Chancellor Philip Hammond went even further to reassure the financial and professional services sectors when he said that British voters were only concerned about foreign workers taking ‘entry level jobs’. According to him there is ‘no likelihood’ that immigration controls will apply to EU workers who are ‘highly skilled and highly paid’.

The Chancellor’s reassurance, however, has cracks in it. First, the debate on foreign workers in the UK is not just about low-skilled jobs. Second, the absence of low-skilled immigrant workers is a concern for business. Third, it is highly unlikely that those EU Member States that have historically supplied entry level workers will look favourably on the discrimination against their citizens in favour of French and German bankers. And fourth, France and Germany are two of the major advocates for the free movement of people and unlikely to agree to a compromise, even if their citizens are at the front of the queue.

Unsurprisingly, the Labour Party is pushing the line that the Government is only interested in a ‘Banker Brexit’. Added to this is the ‘devolution dynamic’, with Scottish First Minister Nicola Sturgeon up in arms and renewing talk of a second independence referendum. London Mayor Sadiq Kahn has also put forward the idea of location-specific work permits to protect the capital from mass talent flight.

Working conditions and social protection

In terms of working conditions and social protection, there are two outstanding issues: access to social benefits and the ceiling on working time.

The debate around Brexit often focused on EU migrants’ social benefits rights. The February 2016 deal between the EU and the UK offered to revise regulations on the coordination of social security systems with regards to child benefits and the creation of an ‘emergency brake’ on migration. This process was due to start in December but may no longer be considered a priority for the EU member states given the rejection of the February package on 23 June. Political focus will likely shift elsewhere, for example to the “posted workers” Directive (96/71)[1]where Germany, France, Poland and Belgium all have high stakes.

Regarding working hours, we might see the long-held UK antipathy towards the Working Time Directive – which regulates the maximum hours to be worked per week and has been roundly criticised in the UK because of the substantial costs to employers and in particular hospitals – translate into the review of this legislation in the UK following Brexit.

Moreover, the UK government might in the future use its regulatory independence from the EU to review the Directive on Temporary Agency Work (2008/104/EC). This grants agency workers in the EU the same pay and rights as full time employees. It has been fiercely fought[2] by the Confederation of British Industry, which characterised it as a “drag” one year after its implementation.[3]

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To conclude, whatever language is used, the debate around the movement of people will continue to be at the core of the negotiations and relationship between the EU and the UK. It is advisable for employers to not only stay up to speed with the latest developments, but to pro-actively scenario plan, prepare for the impact of these changes on their organisation, and lobby as needed to protect their commercial interests and those of their staff.

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