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Brexit: employment and immigration. What now?

12 Jul 2016

The impact of the EU on UK employment law has been profound. And, for now at least, there’s absolutely no change as a result of Brexit; the UK remains a member state of the EU.

It follows that the four freedoms of the Single Market (goods, capital, services, people) also remain in full effect.

In this blog post, we’ll focus on the free movement of people. Over the past couple of weeks, you’ll have heard people argue that, at some point down the line, a problem may arise for employees from other member states who want to move to the UK, or, having already moved here, want to stay. The real problem is they just don’t know quite what will happen.

In its briefing note (01.07.16), The Law Society states:

There is precedent under international law that if a person has exercised a right under an international treaty, they may continue to enjoy the benefit of that right if the treaty ends. This idea of acquired rights, or vested rights, would suggest that people will not be ‘sent home’.”

This sounds sensible. And in practical terms, the widespread deportation of some two to three million EU citizens (no one knows the precise figures involved) by the UK Border Agency would be problematic to say the least.

All we know for now is that feelings on both sides of the Exit debate and both sides of the Channel are raw. But before exit negotiations with the Commission are concluded, we won’t know what the ultimate consequences will be. More to the point, we won’t know whether the EU will accede to any of the UK’s wishes without insisting on freedom of movement and the remaining in place of EU employment law.

A fair few commentators believe that, when all is said and done, not much will actually have changed. If the EU doesn’t insist on freedom of movement as a precondition to remaining part of the Single Market, it will be the first time it hasn’t done so. Norway and Switzerland would doubtless come knocking for a similar deal. So, we suspect, would the Netherlands…

Bear in mind that most, if not all, UK employment law stems from Europe: minimum holiday allowances, parental leave, rights in the event of transfers of undertakings and rights under the Working Time Directive. Following actual Exit, all of these would fall under the jurisdiction of the domestic government. Were the UK to repeal these laws and establish a perceived advantage, the EU would surely cry foul. What sanctions would it then reach for? It’s a mistake to confuse the EU with the Single Market. For Europe’s leaders, this is a political project, not an economic one. If the UK looks at the situation in terms of profit and loss, it will lose the argument.

Electoral issues in Europe – the political element

Conventional wisdom has it that President Hollande, with the Front Nationale snapping at his electoral heals in 2017, won’t make it easy for the UK in any exit negotiations. Germany’s Chancellor Merkel has her own election in 2017, and has to contend with the AFD (Germany’s populist and anti-immigrant, anti-EU party). Spain has its own PEGIDA problems, in much the same way. The Netherlands is more EU-sceptic than the UK; Geert Wilders and his Partij voor de Vrijheid are riding high in the polls on an anti-EU ticket. In short, we’re to believe the risk of Exit contagion is high.

What’s not in doubt is that the primary foreign policy objective for Germany and France is the maintenance of the EU. This will trump any economic argument. Were the mooted Exit contagion to spread, the euro would be threatened, and that could spell economic disaster.

Conclusion

Given what we know, we’re inclined to think that the UK in three to five years’ time will be rather more similar to how it is now than many were anticipating at the time of the referendum. Here’s why…

First, let us make some reasonable assumptions based on what’s being said, then let us extrapolate. Assume that tempers cool over the next few months. Assume that the uncertainty in the situation triggers downward pressure on inward investment. Assume then, therefore, that the UK job market softens or perhaps worsens slightly. Assume that mainland Europe continues to grow (albeit at a reduced rate). Assume that, to a greater or lesser extent, consumer confidence is knocked by the uncertain situation. Assume, therefore, that consumer spending falls over the next 12 to 24 months. Assume too that the uncertainty on rights of EU persons moving to this country reduces EU (and perhaps non-EU) immigration. Assume that the UK economic growth is reduced, perhaps moving into recession. And assume that the reduced economic growth causes a further reduction in immigration.

If Article 50 has not been triggered at this point, a very interesting vista opens up… but that’s another story. Assuming Article 50 has been triggered, we strongly suspect that in any Exit negotiations, the political imperative of Europe to keep the EU together will come up against the economic needs of the UK for a market to trade in. The EU will not risk political contagion; France, Germany, the Netherlands and Spain cannot give the UK a better deal than current member states, even if they wanted to.

So what follows? The UK will be faced with a choice: accept something like the current status quo, or risk being denied full access to the single-largest free market in the world.

In short, we suspect that EU law, in substance if not in name, will continue very much a force in the UK – perhaps even including freedom of movement. Possibly re-branded, but nonetheless, in substance, freedom of movement.

Watch this space.

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