On 23 June 2016, the UK voted to leave the European Union.
Immediately after the result was declared, the pound fell to its lowest level since 1985. What followed were almost five years of uncertainty as various ‘deal’ or ‘no-deal’ scenarios were put on and off the table.
The Brexit Withdrawal Agreement finally came into effect on 1 January 2021, with mixed verdicts from businesses. A recent YouGov survey revealed that just over half (52%) of decision-makers said their company had faced disruption since the beginning of 2021 due to Brexit.
COVID-19 hasn’t exactly helped the situation, creating what some would describe as the ‘perfect storm’. However, many business leaders have stated the impact of Brexit is worse than anticipated and will be greater than COVID, with implications that extend far beyond the length of the pandemic.
The UK is considered one of the best places in the world to start a business. But could all that change? Nine months on, companies are beginning to see the true scale of the implications of Brexit…
Supply chain issues
Supply chains were always going to take a hit as companies figured out a new way of doing business across borders. But how exactly they would be impacted (and how long for) is only now becoming clear.
The Trade and Co-operation Agreement (TCA) between the UK and the EU was agreed on Christmas Eve 2020. But while many were relieved the UK didn’t crash out without a deal, it turns out there’s a little more to the TCA than meets the eye. Headlines promising ‘zero tariffs’ and ‘zero quota trading’ were reassuring at first, yet many businesses are still struggling to cut through the red tape.
For goods to qualify for tariff-free, quota-free access, they must meet the ‘rules of origin’ requirements, which ensure the goods really do come from the UK or the EU. These rules of origin vary significantly depending on the type of product. As such, there are still plenty of compliance requirements, administrative hurdles and costly checks for businesses to contend with, which have added friction to cross-country commerce.
The new rules are particularly challenging for UK companies with a global footprint, which are more likely to source parts or products from outside of the UK or the EU and be excluded from zero tariffs or quota trading. These businesses are, therefore, experiencing hiked up costs and delays at the border due to customs checks — impacting their competitiveness in the EU markets and even globally.
Staff and skills shortages
The combination of Brexit and the pandemic has also acted as the catalyst for some of the worst staff shortages the UK has ever seen.
Over the years, EU immigrants have contributed substantially to employment in sectors such as healthcare, logistics, hospitality, retail, IT and construction. But when the UK voted to leave the EU, the number of people looking for jobs outside the UK spiked in the 48 hours following the announcement of the referendum result. This surge in EU-oriented job searches was largely attributed to anxieties around migrants’ future in the UK and EU citizens looking for opportunities elsewhere in Europe.
Many EU workers who left the UK during the pandemic have also stayed abroad in the wake of stricter immigration rules and the end of freedom of movement — exacerbating the growing worker shortage in the UK and creating a huge gap between the demand for skilled workers and supply. Experts warn these skills shortages will extend into even more industries and may not resolve themselves until 2023.
These new Brexit rules and regulations are further contributing to delayed trade between the UK and the EU and forcing many UK businesses to set up operations in the EU to serve the European market, creating even more administrative headaches for these companies.
An employer of record like PEO Worldwide can help you cut through all the red tape that comes with international expansion in a post-Brexit world. Get in touch to find out how we can help manage your global payroll and all the HR and legal aspects of employing across borders.