Since the results of the “Brexit” referendum on 23rd June, and the vote by a small majority for the UK to leave the EU, advice and opinion on the implications – not least for Global Mobility - has been dominating the news agenda with much uncertainty about the likely impact on businesses and expatriates in the UK.
Following the resignation of David Cameron, the expected period of political instability over several months (while the process of appointing a new Prime Minister post-Brexit was undertaken) was dramatically shortened to 3 weeks, with Theresa May taking over as Prime Minister on 13th July and quickly putting in place her cabinet and setting out her vision for the new government.
The quick resolution to the new leadership of the UK has calmed financial markets significantly, with the FTSE now trading significantly higher than in the run-up to the referendum, and Sterling recovering some of the ground lost in the days after 23rd June.
So, what does this mean for global mobility professionals? In our view, the simple answer today is – business as usual, for the following reasons:
Rights of EU Nationals in the UK
One of the main concerns following the referendum result was the impact on EU Nationals already living in the UK, but a statement from the UK Home Office has confirmed the rights and status of EU Nationals living in the UK are to be properly protected:
"There has been no change to the rights and status of EU nationals in the UK, and UK nationals in the EU, as a result of the referendum.
The decision about when to trigger Article 50 and start the formal process of leaving the EU will be for the new Prime Minister. The UK remains a member of the EU throughout this process, and until Article 50 negotiations have concluded.
When we do leave the EU, we fully expect that the legal status of EU nationals living in the UK, and that of UK nationals in EU member states, will be properly protected.
The government recognises and values the important contribution made by EU and other non-UK citizens who work, study and live in the UK."
One of the unknowns is that it is possible (but by no means certain) that EU citizens who start work in the UK between now and the disengagement will acquire similar rights to remain in the UK.
While further conjecture exists around the possibility of those who have lived and worked in the UK for less than 5 years needing to apply for a permit to continue to reside in the UK, at this stage there is no definitive guidance to suggest this is a likely outcome.
Period of Disengagement
We know it will take at least 2 years for the UK to complete negotiations to disengage fully from the EU; this process can only start once Article 50 has been triggered, and whilst some EU member states have publicly stated their desire for the UK to trigger Article 50 quickly, the new UK government seem in no rush to move forward without careful consideration of next steps.
The result of the exit negotiations will ultimately need to be approved by a majority of EU states, as well as both the UK and European Parliaments, and in the intervening period the UK is required to abide by all existing EU laws and treaties.
In parallel with these negotiations, trade talks have already been announced to set-up bilateral agreements between the UK and potential trading partners. These talks are lengthy processes, which are expected to take longer than the exit negotiations with the EU, and a lack of skilled negotiators to conduct these talks has already been highlighted by the government.
Potential Economic Impact
Uncertainty will exist until these agreements have been finalised, with areas such as corporate taxation, customs laws and access to the single market all of serious concern to businesses, as is the potential economic impact.
In our view, the economic downside of Brexit has perhaps been over-estimated. No government will wish to see the UK economy shrink during their tenure, with economic prosperity intrinsically linked with voters’ satisfaction with the party of government. Negotiators will be seeking the best possible outcome during the Brexit negotiations, perhaps with some form of EEA-type compromise which continues to allow the UK access to the single market.
Equally, the suggestion by the previous Chancellor of a further reduction in corporation tax to make the UK more attractive to inward investment, is an indication of the type of strategy the government may employ to ensure the UK remains a headquarters location of choice for multi-national corporations, and the reduction in the value of Sterling may provide a boost to exporters.
So, what happens next?
Communication is key. At this early stage, there are too many unknowns to be able to determine the full impact of Brexit but, as negotiations progress and the picture becomes clearer, detailed plans and policies can be determined and early communication with affected employees and key stakeholders will be vitally important.
In the interim, there are some short-term considerations which can be addressed by mobility teams, such as reviewing housing and COLA allowances for assignees paid in GBP due to the drop in the exchange rate of the pound against major currencies but major policy changes should wait until hard facts, rather than educated guesses, are available.