Brexit and immigration: what contractors need to know

With the EU referendum imminent, it’s high time to address what’s been both a dominant issue of the debate so far and a potentially deciding factor for contractors tomorrow -- immigration, writes Jordan Marshall, policy adviser to the Association of Independent Professionals and the Self-Employed (IPSE).

Although both sides of the campaign have been vocal about immigration, it’s the ‘leave’ camp which has ensured that barely a day has gone by without a dire warning about EU migration if the UK stays in. These warnings won’t be lost on contractors, some of whom are worried about new worker arrivals driving up competition and pushing down pay rates.

We know from our own members that this as a key area where contractors want to see change. When we surveyed them earlier this year, the majority (58%) of IPSE members were concerned about the effects of immigration on their business. There are other big concerns too; 64% want to ensure the government don’t ‘gold-plate’ EU legislation by making it tougher in the UK than other countries, while a similar number (61%) want to ensure all the EU countries implement the rules evenly for a level playing field.

It’s important to understand that if we leave, we don’t know what our new immigration system will look like. We could have complete control over our borders; no longer be subject to rules on freedom of movement of people -- and we could be free to only allow entry to workers the economy needs. But Norway, for example, is part of the European Economic Area despite its independence from the EU, and is therefore obliged to accept the free movement of people. Switzerland has a similar arrangement, and despite not being an EU state, 16% of its citizens are EU nationals -- more than the UK.

One option for the UK may be to negotiate individual deals with each EU country. But this will be complex, is likely to take a long time, and rebellions from pro-EU MPs could slow the process further. A number of heavily pro-Remain MPs have even threatened to use their majority to negotiate entry to the single market even if we leave. It’s unclear what the implications of this may be, but it could mean that a post-Brexit deal allows EU workers to move here freely anyway.

It’s been suggested that we’ll introduce a points-based system for EU citizens, much like that of Australia, to determine immigrants’ eligibility to come here based on the skills they bring (and the skills we need). It’s possible that sectors like IT could then be added to the Shortage Occupation List, meaning EU IT contractors could work here even in the event of a Brexit. 

In addition, we can’t forget that the free movement of labour works both ways; at least one in ten IPSE members regularly work abroad and many will work in Europe. Amsterdam and Frankfurt, for example, are big financial centres and attract large numbers of UK freelancers. If we leave the EU, their right to work in these countries could be restricted too and we don’t know whether the UK will be granted special status.

Nevertheless it’s possible, even probable, that a Brexit could reduce the competition for contracts from EU citizens. Bear in mind though, the government might then seek to make up for skills shortages by admitting more highly-skilled migrants from non-EU countries, potentially increasing the use of ICTs (intra-company transfers). IPSE has long been concerned about the misuse of ICTs, because the system can be abused by outsourcing companies to exploit cheap labour from abroad and undercut wages for UK contractors. We successfully campaigned for the increase of a minimum income threshold for workers transferred from abroad. Any liberalisation to the ICT regime would therefore be unwelcome.  

Whichever side triumphs in this referendum, questions will remain about immigration. The government promised to reduce numbers to the tens of thousands, and if Remain emerges victorious, there will be even greater pressure to deliver this. A victory for Leave would lead to calls from the contracting community who currently work in the EU to get a deal which would enable them to continue doing so with the least amount of hassle. Those negotiating our exit would also have to spell out what the points system would look like and have it ready to go when Britain ends its relationship with Brussels. Tomorrow will be an incredibly significant day for the country, no matter what the result. One thing is for sure: with the polls so close, every vote matters.

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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