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How can the UK’s labour market compete post-Brexit?

By Justine Riccomini

The House of Lords hearings on how the UK labour markets could be affected by Brexit have raised some difficult questions.

The main items which could negatively affect the success of the labour market post-Brexit are a mixture of local attitudes, over-prescriptive employment legislation, and the failure of UK and devolved Governments, local authorities and employers to work together to manage the migrant population and skills shortages.

On top of this, slavishly operating net migration statistics are politically intuitive, but not fit for purpose.

These issues sit under the shadow of whether Brexit is hard or soft in its treatment of the much-needed talent and skills which migrants bring to Britain, and whether Britain has lost the ability to grow its own talent.

A number of academics gave evidence at the Lord’s enquiry. The themes are summarised below:

Out of sight, out of mind

Apart from in Scotland, there is not a great deal of appreciation for the migrant population’s contribution to the UK economy.

The attitude towards immigrants is affected by the ability of the local area infrastructure to cope with and support the needs of the incomers.  If locals perceive their services to be affected, they react negatively.

It is vital that the anti-immigration sentiment in the UK is overcome to ensure the labour market stays steady.

Cleaners and bankers

Could a distinction be drawn between skilled and unskilled migrant workers? The answer, was no. There should not be a distinction between skill levels as if there is a skills gap at any level it needs to be addressed to avoid a knock-on effect to other business areas.

Keeping the financial service sector in the UK is vital as it is crucial to the economy.

The UK also fails to train its own nationals and many employers have a preference for EU workers as they are often better skilled than UK workers.

Labour market turnover is expensive

It is far better to encourage people with the right skills and talents to come to a place – and get them to stay there – than to have high turnovers… a lesson the academics feel the UK needs to learn quickly, before Brexit takes place.

It is important to ensure that transient workers and those with low skills are encouraged to integrate and develop to prevent creation of migrant ‘silos’ and poor language skills.

Integrated migrants are more likely to feel they belong and contribute rather than being beneficiaries. The whole spectrum of skills needs to be taken into account, not just academic achievement.  Care needs to be taken as to how ‘skills’ are defined so as not to be too prescriptive.

Salary level as a criterion could exclude younger talent who have not yet reached a high enough salary level but who possess the necessary skills.  It is also very hard to show that once immigration stops, locals start doing those jobs again.

Not many contemporary examples of this exist apart from Spain, where unemployment increased so much during the financial crisis that people were prepared to take any type of work just to earn some money.

Devolving responsibility to employers is not the answer

Devolving employment responsibility and immigration controls to employers is not a successful way to recruit, import and retain migrant employees.

A cohesive working arrangement between UK and devolved Governments, local Government, chambers of commerce and employers as well as training providers is essential.

Imposing criminal sanctions on employers and banks is not the way to go, and yet there appears to be a great deal of nervousness about changing the system when a change is obviously required.

A form of Apprenticeship Levy for companies that bring in a lot of migrants could help tackle UK skills shortages.

Scotland already produces a shortage occupation list, which could be matched to an immigration system.

Zero-net migration results in a shrinking labour force

The points-based system introduced in 2008 is bureaucratic and complicated, and is not working for SMEs.

Working towards a zero-net migration target is trying to achieve the impossible – whilst it can be a vote winner politically, it is stating that the UK wants more people to leave the UK than to arrive, until the figure balances itself to zero.

The notion of a net migration figure does not take into account the loss of skills, knowledge and experience of those leaving – it merely concentrates on reduction of headcount – at any cost.

As emigration cannot be controlled as it is voluntary for most people, using net migration as a means of analysing the success or failure of an immigration policy is not effective or transparent.

According to Dr Martin Ruhs, a negative net migration figure should be seen as a failure. Reducing immigration today will reduce emigration tomorrow.  At current levels, even if net migration was brought to zero, the UK would still not meet its own targets.

Regional caps on migration will ensure less well-populated areas get the boost they need to ‘stay open’ for business

The Lords did not seem to be in favour of this proposal. The logic to this thinking is if everyone wanted to move to the most successful regions of the UK, the other areas would become starved.

To act as incentive to business, there should be an even spread of migrants with talents matched to gaps around the UK.  However, this needs to be carefully managed to ensure that it does not stymie the movement of people, be seen as totalitarian or become unworkable for employers.  A sensible balance needs to be achieved.

Australia, New Zealand and Canada are the ones to watch

These countries are exemplars of how to maintain a robust, all-encompassing immigration system which takes account of skills, training, development and regional need, whilst pursuing unwanted behaviours and effectively deporting offenders.

Excellent data gathering and analysis underpin these systems as well as a long-term humanitarian and economic strategy, together with cohesive working between the various stakeholders.

Sweden’s employment market is not attractive

Despite its open-door immigration policy, Sweden has failed to attract the quantity of migrant workers it desires due to a very heavily regulated employment system.

The UK is fortunate that it does not operate its employment market in this way and as such, if it was to adopt a less strict immigration system, it might attract more of the workers it needs such as into medical and care work.

How will the UK compete effectively post-Brexit?

There are many considerations which need to be taken into account, but above all the UK must be a safe, friendly, family-oriented place for migrants to come to work, and to stay.

The UK must consider the medium- and long-term strategic objectives and take an evidence-based approach in terms of skills inside and outside the UK.

It must also decide where EU nationals stand in terms of being able to stay in the UK if they are already living and working there.