Brexit: the end game contractors could see

It’s interesting to see that it’s not only us who favours simply carrying on -- as you were before – in the immediate aftermath of a potentially far-reaching referendum result.

This ‘carrying on’ response is one which those who want change might think is a ‘carry-on’ in the comedic sense. But it’s a response that we had to the UK’s decision to leave the EU, and it’s a response the Swiss have had to their nation’s decision to limit immigration, writes Duncan Taylor of Capital GES.

In fact, although Switzerland voted in favour of restricting immigration from EU countries in February 2014, contractors from the UK wanting to work in Bern or its surrounding cities, probably haven’t noticed.

At the time, the move caused concern not only in Switzerland, but also across the rest of Europe. Understandably, it caused many EU citizens to question their ability to work in Switzerland in the future. However, because the February 9th 2017 deadline for Switzerland to impose the proposed restrictions has now passed, it seems very unlikely that further action will be taken.

This inaction means that little will change for EU nationals (which British contractors currently are) wanting to work in Switzerland. So despite the Swiss saying ‘nein’ to more workers from the UK and other European nations, entry into Switzerland today, in 2017, is as easy as it always was. Could a similar situation play out with Brexit? Is a vote by the UK saying ‘no’ to staying in Europe, which was largely driven by Britons wanting tighter controls on immigration, not going to pack the punch to EU workers (and in turn, Britons wanting to work in the EU), that ‘hard Brexit’ supporters want? There’s some evidence suggesting contractors will be hoping it doesn’t when we’re no longer an official member, at one minute past midnight on March 30^th 2019.

What’s clear is that we’re now well into the two-year timeframe to negotiate all issues which are affected by the UK voting to withdraw from the EU. They include the following six points -- six facts, a rare commodity in the still emotive UK-EU furore:

1. The UK does not want to continue allowing unlimited EU immigration.

2. The two sides must guarantee the status of EU members living in the UK, and vice-versa. The same applies to work visas, which are not currently required.

3. The UK wants to withdraw from the European Court of Judgment.

4. The UK wants a "customs union" with the EU. That means they will not impose tariffs on each other’s' imports and impose common tariffs on imports from other countries.

5. Both sides want to continue to trade.

6. The EU will require a cash settlement from the UK to meet existing financial commitments.

There’s more that we can say with certainty. The withdrawal plan must be approved by the European Council, the 20 EU countries with 65 per cent of the population, and the European parliament. Then the UK will copy the EU laws into its own laws, which can then be amended or repealed.

Throw into this mix, David Davis, the Brexit Secretary. At the time of writing, he wishes to negotiate bilateral trade agreements with enough countries to replace the EU within the timeframe. He believes the EU will allow tariff-free access without insisting on the free movement of people.

But confusingly, speak to what the June poll indicates is a majority of Brits (-- just, at 51%), and they’ll often say the main advantage for the UK of withdrawing from the EU, is that we can prohibit the free flow of people. As referred to, this was one of the leading reasons why people voted ‘Leave.’ However, the prohibition would hurt Britain's young; European-language speaking, atypical, flexible-hungry workers. Contractors, who a few of those categories cover, would likely be worse off too. And not just in the UK. Germany has projected to have a labour shortage of two million workers by 2030.

Another disadvantage we foresee is the potential loss of Britain's tariff-free trade status with the other EU members. Tariffs increase the cost of exports, making British companies more expensive and less competitive. It also raises import prices. That creates inflation and lowers the standard of living for UK residents.

But the upside is that on related financial issues, such as taxation, the UK is going to be free to set its levies and liabilities without following EU guidelines. It also won’t have to fork out the not insignificant EU membership fees.

From the contractors and companies we talk to in London however, these outgoings are probably a price worth paying. Some of them fear that Brexit could be disastrous for the City, the UK’s financial centre. Would London still be the base for companies that use it as an English-speaking entry in to the EU economy? Probably not. And if it’s not, a London real estate collapse could ensue, just at a time when our construction sector is only just recovering.

In the sector most contractors we advise face -- IT and Computing -- the concern is just as palpable. The UK will lose the advantages of EU state-of-the-art technologies. It grants these to its members in environmental protection, research and development, and energy.

The tech sector is equally concerned at the prospect of losing the ability to bid on public contracts in any EU country. These are open to bidders from any member country. The biggest loss to London will be in services, especially banking. Practitioners will lose the ability to operate in all member countries. This could also raise the cost of airfares, the internet and even phone services.

But maybe this too is a price worth paying, to leave a club that our country clashes with? Indeed, the UK has often voted against many EU policies that other members supported. The International Monetary Fund’s Director Christine Lagarde summed it up best, when she said, “The years are over when Europe cannot follow a course because the British will object.” Hinting at a sense of relief for member states, she added, “Now the British are going, Europe can find a new plan.” Recent polls do concur by finding that, sine Britain’s has voted to exit the EU, many member citizens feel a new cohesiveness. Spain and Catalonia being the glaring exception.

What contractors on both sides of the UK-EU debacle tend to agree on, is that the UK will have to carefully manage the situation. But we’ve found little support for dragging it out, whether you voted ‘Leave’ or ‘Remain.’ In that sense, current powerbroker Angela Merkel, Germany's chancellor, is probably not going to be too well-received by Britons for her call to employ patience in a process already scheduled to last a total of two years. Worse still for those who want to get on with things, some comments by prime minister Theresa May point to an additional two years -- so four years in total -- due to the sheer scale of the challenges involved, to allow a transitional period post-Brexit. That’s something we think contractors will all agree deserves a ‘no’ vote.