My colleague Dave Heilbron recently wrote a great blog post entitled “Brexit Fallout: Is The U.K. Facing A Brain Drain?” In his post Dave highlighted a number of key issues and some anecdotal evidence suggesting that the UK will potentially have a talent exodus on its hands post-Brexit. The issues Dave raised are very real, but the argument was written from a Continental European perspective. The view from London is different. Therefore, in this post I thought it important that we consider how the UK businesses have reacted to the June 23rd vote to leave.
Firstly, it is worth pointing out that the majority of UK businesses wanted the UK to remain a member of the European Union. As such there was an initial shock at the result not just in the UK but globally, and this was reflected in exchange rates and stock markets. What we are seeing now, eight weeks on, is a stabilization of sterling as it finds its new valuation level.
Uncertainty of the impacts
What is clear eight weeks on is that there will remain a lot of uncertainty around what the impacts of Brexit will be for some time to come. Since the vote, the UK has a new Prime Minister in Theresa May with a number of new ministers joining the cabinet, the most notable of which is Boris Johnson, the chief Brexiter, as Foreign Secretary. What is clear is that the UK is in no hurry to activate Article 50, the formal process for leaving the European Union.
A UK recession?
So what does all this mean? In the short term there will inevitably be some job losses, and we are expecting that the UK will be officially in recession when the next set of official figures is released. Industries which will be hardest hit will be importers and those in the financial services sector. However, there will be opportunities for exporters with the weakened pound making UK-made products more competitive. It is also worth keeping in mind that the service sector accounts for 70% of the UK economy and as such the UK will fight hard to protect its position on the world stage.
We are seeing an influx of EU-based candidates
What has been interesting following the results of the referendum has been the number of CVs we are receiving from EU-based candidates. Candidates are telling us that they want to establish themselves in the UK before any exit.
There is a real fear that without the UK the EU will be weaker (indeed, arguably it is the one near certainty in all the Brexit debate!), and that the stronger economies won’t be able to continue to support the weaker ones in the mid- to long-term. Without the burden of supporting these weaker economies, the prevalent view is that the UK will grow much quicker than the EU. However, I personally think that these views haven’t taken into account what the immediate short-term effect of Brexit will be, but ultimately only time will tell.
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The digital revolution
Prior to the industrial revolution business was mainly conducted locally. After the industrial revolution business became global. Now we are living through what will inevitably be called the Digital Revolution. In 1998, when Google was founded, the digital revolution really began to take hold. Google and Facebook in particular have changed the way we do business, and the digitization of everything we do is now growing at an ever faster pace. Doing business anywhere in the world can now be done at the click of a button; employees can be based anywhere in the world.
Business moving forward is less about traditional bricks and mortar and more about digitization. London is at the forefront of this revolution. According to KPMG’s Fintech 100 report the UK comes in third globally, with the number of companies on the list. The Americas have 40, EMEA 20, UK 18, Asia 12 and Australia and New Zealand 10 each. The UK is a single country whereas the first two on the list are regions. As such the UK is very well positioned for the future.
Talent is in demand
Despite the negative impact that Brexit will inevitably have on the UK economy, in the short term there is still a need for UK companies to attract the brightest and best talent. Just because the UK will no longer be a member of the EU, this does not mean that businesses will hire sub-optimal individuals. If anything, the war for talent will intensify. Companies will have to work harder to attract the best people irrespective of nationality. This could result in the UK becoming an even more dynamic and attractive place for genuinely talented, high achieving and motivated people to work.
This is a common theme and is echoed by our board advisory practice. Our directors sit on over 25 boards in the UK in both public and private sector organizations. Moorlands Human Capital Chairman and board advisory member Vince Linnane said: “Digital disruption and finding the right talent are huge priorities for the boards we advise. The challenge is how to stay ahead of the competition and find the right people to ensure that businesses remain relevant both now and in the future”