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Four Consequences of Brexit on Global Mobility

The recent vote in the UK in favor of leaving the European Union has the potential to dramatically alter both the business and investment climate in the country.  Even as the political and economic fallout from “Brexit” intensifies, several important issues arise for companies that have global mobility programs that interact with the UK.  At this point, there are more questions than answers, but each of these four areas of consequence will be at the center of any dialogue surrounding the UK and corporate global mobility strategies.

1.     Brexit and Immigration Uncertainty

One of the drivers of the successful Brexit vote was resistance to permissive EU immigration policies, and now the UK will have to establish new guidelines for business visas, work permits and residency.  Some of these immigration laws could be different for EU and non-EU workers, further complicating the issue.

Given that new legal parameters have yet to be established, HR departments will need to monitor all developments, especially those that pertain to workers from EU member countries that are already working in the UK.

Some of the immigration issues for global mobility include:

  • Will there be a grace period extended to workers who may not be in compliance with any new immigration rules? How long will that grace period be extended?
  • What will be the effect on tax treaties and social security totalization agreements between the UK and EU member countries?
  • Will the UK actually implement immigration measures that are pro-mobility and of benefit to multinationals that wish to keep their operations in the country?
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2.     Impact of Brexit on Expat Packages

An immediate impact of Brexit was the sharp fall in the British Pound, which recently touched a 30-year low against the US dollar.  The drop reflects a lack of confidence in the economic outcomes from Brexit, and the GBP will likely continue to be weak against other currencies for the near future.  Lasting changes in currency rates will certainly be a factor for companies in structuring and valuing foreign assignments in the UK.

Foreign nationals on assignment in the UK that are paid in pounds will be challenged to meet home country expenses, since their cross-currency compensation may have decreased by as much as 10% since the Brexit vote.  Companies will need to examine their policies on how to treat currency fluctuations that have the potential to affect both expat salaries and company return on investment for international assignments.

3.     Effects of Brexit: Relocating Existing Employees

Companies that use expat workers for their UK operations are now considering alternate locations. For example, the BBC is reporting that “Morgan Stanley, the investment bank, has already begun the process of moving about 2,000 of its London-based investment banking staff to Dublin or Frankfurt following Brexit…” This type of move has significant costs for any company, but in the long run may be cheaper than weathering uncertain immigration and residency requirements that could evolve in the UK.

Similarly, expats may request relocation to other countries, given that the UK population seems to have cast a vote for a more isolationist and less welcoming policy toward foreign nationals living and working in the country.  HR departments will want to maintain a dialogue with expat workers to monitor their social and work experiences during the time of transition, and have a strategy for handling dissatisfied expats already in the UK.

4. Limitations for UK Companies to Service European Markets

Businesses in the UK have relied on the pool of available skilled workers from the EU, which may now shrink depending on changes to immigration laws following Brexit.  There are 3 million EU workers in the UK, many of whom are already applying for permanent residency in the face of the uncertainty following Brexit.

It is possible that a quota system could be implemented for skilled workers, similar to the non-immigrant H1B visa program in the US which is pegged to a maximum of 65,000 visas per year, to prevent dilution of job opportunities for US citizens.

A corollary of this issue is that UK companies could face similar immigration barriers in servicing or expanding into EU markets. If new UK laws limit mobility, then their EU counterparts may impose similar restrictions.  In addition, by restraining freedom of movement, the UK government could also be exposing businesses to new trade tariffs and other measures that may inhibit business growth for UK companies within the EU.

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Summary

HR departments and global mobility professionals will want to assess whether they are prepared to handle the increased administrative work, while staying abreast of new legislation that will result from Brexit.  Those expat employees already working in the UK will need a new level of attention as the changes unfold, so that they may make long term decisions based on any new immigration and compliance measures that unfold.

Ultimately, the choices of how to structure a global mobility strategy in the UK will fall to senior management; considering potential increased costs, business risks and a pending change in political leadership.  What is certain is that following the Brexit vote, it is no longer ‘business as usual’ in the UK, and global mobility programs will need to adapt to the new realities.

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