Brexit: the pros and cons for IT contractors
IT contractors working in even the most remote of locations will have got wind of the UK's relationship with the EU approaching a definitive resolution through an EU referendum on June 23rd 2016, writes Matt Walters of overseas contracting firm Capital Consulting.
Regarding the outcome of this divisive vote, there is a high degree of uncertainty -- something that even Mark Carney, the Bank of England governor who tends to avoid saying anything too controversial, has acknowledged.
Unchanged since Mr Carney’s alert last month that a ‘leave’ outcome will impact the UK’s financial stability, is that pollsters are delivering conflicting projections. What is clear, however, is that the campaign race is relatively tight. What’s less clear is what the commercial and legislative landscape for contractors might look like if there’s a change – a ‘Brexit.’
What EU uncertainty means for contractors
At this stage (at least two months from voting day), we can assert that the uncertainty’s impact on the recruitment of professional contractors from the UK into international markets, particularly in the Eurozone, is not hugely significant.
Indeed, businesses and recruiters looking to recruit into those markets are continuing to do so using UK contractors. Some in the wage-richest sector of financial services may even be buoyed by David Cameron. That’s because the prime minster returned from negotiations with 27 EU member states earlier in 2016 to announce new protections for the industry, in the shape of a range of guarantees for the City of London. Mr Cameron says these guarantees will allow the UK’s capital to remain a competitive global centre for economic activity. Of course, not everyone is impressed with this aspect of the ‘deal’ that the PM struck.
We foresee that today's ‘not hugely significant’ impact on UK contractor recruitment will remain until, or unless, sterling experiences more significant valuation issues than its current weakness. Something akin to the recent struggles of the Argentine peso would be a game-changer.
But that’s not to suggest that the continuing downward trend of sterling is a non-factor. Candidates are ultimately consumers, so more of them will think twice about relocating to Europe to perform a contract if the weakness persists. Add to this a drop in the region of between 2 and 5 per cent in relative earnings due to that weakness, and the appetite of UK contractors to actively seek out opportunities within the Euro countries might reduce.
Conversely, such a reduction could well boost other markets with different currencies. The obvious European destination then becomes Switzerland, particularly in light of the Franc’s recent performance, coupled with the country’s high demand for foreign workers to address skills shortages in its professional industries.
Leave and Remain; techies in both camps
One prominent person wanting the UK to take a leaf out of Switzerland’s book is Boris Johnson. The London Mayor’s joining of the ‘Leave’ campaign saw financial markets respond negatively and the pound pressurised, although it is our opinion that a potential Brexit would not, by itself, add to the woes of the pound.
But if Mr Johnson and his supporters are victorious, the UK would need to undergo a period of adjustment. At the very least, a series of bi-lateral treaties would need drawing up. This is being seen by some as a distinct advantage to a Brexit. Specifically, 250 business leaders believe that new agreements on trade would be more agile and more relevant to the UK economy than the current EU-wide treaties that must be agreed by all partners. Tellingly, many of these leaders are successful entrepreneurs – individuals who have proved that there’s prosperity in going it alone. They include the founder of cloud specialists the Electric Jukebox Company; a founder of Carphone Warehouse, and the founder of Phones4U. Lesser-known technology bosses, including those in IT consulting, software, recruitment and management consulting are on the list too.
These IT-centric business people argue that not contributing to the EU would save the UK government vast amounts of money each year that could support home grown SMEs and entrepreneurship instead. That cash could also be used to open up more options for the UK to trade on a global scale.
The Leave campaign further contends that the UK’s substantial export market to EU members will be unaffected by a Brexit. In its own words, “The UK's exports to the rest of the world are growing twice as fast as the UK's exports to the EU. The UK's three fastest growing export markets are outside the EU.”
Others disagree – the government for example, and the CBI, the employers’ organisation, are both against a Brexit. So too are clients of IT contractors, such as BT, O2, Vodafone, BAE Systems, Shell and HSBC. The latter has even warned it will move 1,000 of its UK jobs to Paris if the vote doesn’t go its way. Some commentators point out that the ‘Remain’ camp amassed signatures from just 36 leaders; compared with 250 for ‘Leave.’ It seems to have been forgotten that these 36 represent the UK’s very largest businesses.
Where we stand
These 36 listed companies are concerned that restricting the movement of workers if a Brexit happens may make the UK less attractive for multinationals. We agree this is a prospect, and think that leaving will seemingly put pressure on EU-heavy businesses to remain in the UK.
In addition, the outcome of any future treaty negotiations in the event of a Brexit is uncertain. It may become more difficult for UK workers to use their skills abroad, while jobs that rely on the EU status of the UK may be at risk.
Another pitfall that we identify of leaving the EU is that it might result in inertia in the jobs market, as cumbersome legislation is redrafted to reflect subsequent changes to the employment landscape. Would the UK economy be able to withstand this drain on resources at such a fragile time? Perhaps there would be more people answering ‘yes’ to this question if there weren’t already a number of unresolved issued requiring action -- the still worrisome economies of Greece, Spain, Italy and to a lesser degree France, for example, or the migrant crisis.
The Leave campaign seizes on these ‘issues’ on our continent as a reason for the UK to leave the union, but the EU is constantly changing, allowing it - and us as a member - to mitigate risks, whether they are obvious and short-term, or more subtle and long-term. Moreover, and so far at least, the case for Brexit has not been adequately made. It is also my view that there is too much uncertainty about the outcome of future treaty negotiations if the UK were to leave the EU. For these reasons and others, contractors were recently in agreement that ‘remain’ is preferable to ‘leave.’
Helping you decide; in or out
Ultimately though, the real ‘issues’ as far as UK contractors, their recruiters and their clients are concerned pertain to legislation governing taxation and employment regulation. The implications of these areas for contractors in the event of a Brexit, compared to the burdens these areas exert on contractors today when the UK is an EU member, will be explored in our next exclusive article for ContractorUK. Yet by then, it is the UK’s own regulations on travel and subsistence that may be causing more disruption to the professional temporary labour market than that which may be caused due to the biggest vote on the UK’s future in 40 years.