An uncertain future for Britain and its contracting sector
Contractors and freelancers face an uncertain future following the UK’s decision to exit the European Union (EU) following the historic referendum on Thursday 23 June 2016. The results of the vote showed 17,410,742 (51.9%) in favour of leaving versus 16,141,241 (48.1%) in favour of remaining.
So, the nation has spoken. After months of campaigning and lively televised debates, Britain has decided to leave the EU after 43 years of membership.
In what, as expected, proved to be a close-fought contest, the ‘Leave’ campaign, to the surprise of many, has triumphed, and judging by the regional results, that margin of victory was more pronounced than perhaps the figures reveal. With the prominent exceptions of London and Scotland, it was a celebration for the “outers” of the North (perhaps unexpectedly) and Wales. Indeed, vast swathes of the country opted to say “au revoir” to Europe.
How did the UK get to Brexit?
Before looking ahead and speculating about a very uncertain future, it is worth going back in time and retracing some of the key historical milestones that took us to the momentous referendum vote of 23 June 2016.
The European Economic Community (EEC) as it was then known was ratified by the Treaty of Rome in 1957 and its six founding members (France, West Germany, Italy, Belgium, the Netherlands and Luxembourg). Following several rebuttals, notably from president De Gaulle of France, Britain finally joined the EEC in 1973 under the leadership of pro-European prime minister, Ted Heath.
Although around two thirds of the population voted to stay in the 1975 referendum called by the Harold Wilson government, the road ahead was often fraught with difficulty and discord. Despite signing the Single European Act of 1986, Margaret Thatcher vehemently opposed any notion of an economic and political superstate. Britain was increasingly the lone critic of some of the more controversial legislation passed by the EU, such as the Common Agricultural Policy (CAP).
Despite signing the Maastricht Treaty in 1993, then prime minister John Major negotiated a veto that meant Britain would not be adopting a single currency, effectively ruling out monetary union. Further clashes ensued as the Blair and Brown governments successively locked horns with the EU – the ratification of the Treaty of Lisbon in 1997 was again being seen as a sign of surrendering sovereignty. Current premier, David Cameron, had promised a referendum if he remained in office following the 2015 general election.
Meanwhile, EU membership almost doubled from 15 countries in1995 to 28 in 2013.
What is the future for contracting following Brexit?
What happens now? Well, what we do know is that Article 50 of the Lisbon Treaty stipulates a minimum two-year process for Britain to start negotiating a new trade agreement with the EU. What this means is that Britain will still be bound by EU treaties and regulations during this interim period, depending on how long the negotiations take.
The decision to exit the EU for good brings with it many unknowns. Nobody can predict with any degree of certainty what the full political and economic impact of leaving the world’s biggest single market will be.
There has been much speculation and scare-mongering but the reality is that we just don’t know and won’t know for many years to come. Unsurprisingly, the reaction of the markets to the new normal of uncertainty has sent shockwaves around the world. The pound to dollar rate hit its lowest point in 30 years, as investors ‘fly to safety’. It’s not likely to stop there either.
Brexit uncertainty will benefit contractors in the short-term
One of the key questions is the arrangement that Britain will broker with the EU and how these negotiations will pan out. Will this be a Norway style agreement with all the benefits that current members enjoy? Or, as would appear more likely, a looser deal with restricted movement of labour? Furthermore, how will the passporting rights that allow firms headquartered in the UK to act in the EU as if they’re operating in one country be affected? Tariffs and barriers to services are most certainly on the horizon.
This uncertainty could work in favour of contractors as the demand for temporary workers rises as firms require more assistance with business transformation projects. Upskilling of permanent employees might be another forced choice should the work status and rights of EU workers in the UK change. The same would clearly apply to British workers living abroad.
The impact on the City of London’s status as the pre-eminent global financial centre is also in question should we not be able to sell our services as freely in the EU. This could lead to a fall in employment opportunities in financial services, as some firms may well move activities to continental Europe. This will have an adverse effect on contractors, given that the sector has historically always been a net contract creator.
There will be added red tape for employers as they need to keep abreast of the raft of legislative changes that will affect their workforce following the decision to leave. Up until now, EU citizens have been able to work freely with no restrictions.
However, for the time being at least, there should be no dramatic effects from the Brexit vote. As far as we know, it looks like Article 50 will not be triggered until David Cameron steps down in October and his successor takes over. Until new arrangements have been agreed, it is difficult to forecast the impact, good or bad, faced by the community.
Article 50 does not say that the process takes a minimum of 2 years. It says ‘ The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.’ So it’s a maximum unless longer is agreed
It seems clear that Brexiteers had no plan not expecting to win, which contributes to the chaos we are seeing.
( http://hubpages.com/politics/Brexit-The-nightmare-begins-for-the-winners )
While the outcome is unpredictable there is a chance the freedom of movement we have enjoyed will persist as we may still be part of the market. We could also apply to join the Schengen Zone.
I am trying to remain optimistic but the only way I see at present to avoid being trapped in the UK with its anti-contractor and indeed anti self-employment attitude as evidenced by IR35 and Section 66, is to fight for Scottish Independence and a place in the EU for Scotland. The good news is that many people in Scotland seem to share this view and Banks are talking about moving to Scotland from London.
It was not the result I wanted but I can see benefits in the long run
“Vote Leave” didn’t have a plan, but they hardly represent everyone who voted to leave. They were just the group that the electoral commission chose to appoint to run the leave campaign (god knows why!).
There were a lot of leavers who weren’t immigration-obsessed loonies and were frankly embarrassed by Boris, Gove and Farage.
For what it’s worth, there is an exit plan out there named “Flexcit” and it involves joining the EEA and EFTA (alongside Norway, Iceland, Liechtenstein and Switzerland), at least as an interim step. The two year time period granted by article 50 is nowhere near enough time to negotiate trade agreement so this approach would give us access to the single market whilst buying us time to negotiate a bespoke agreement.
It’s worth noting that as part of the EEA, Liechtenstein have been able to invoke restrictions on the free movement of people and Iceland have been able to restrict the free movement of capital, both whilst retaining access to the single market. The restrictions can be invoked unilaterally via article 112 of the EEA agreement. This means we may well be able to have our cake and eat it….
What people need to be most cautious about in my view will be the content of any future trade deals. In this context one has to look at what has been negotiated between the USA and the EU commission over the past three years behind closed doors with regards to TTIP (Transatlantic Trade and Investment Partnership) and in between Canada and the EU commission with regards to CETA (Comprehensive Economic and Trade Agreement) paving the way for deregulation, further privatisation and providing corporations with the power to sue governements in private arbitration courts to get rid of regulation and laws hampering their profits = ISDS (Investor State Dispute Settlements). These deals have so called stability clauses making it close to impossible to reverse any privatisation in the future. These deals also pose a particular threat to the NHS which has deliberately been distroyed to open it up for private investors. CETA which has been completed already and awaits ratification by the EU Council in the autumn will be provisionally implemented prior to being signed of by individual EU member states! These deals indeed make no great advertisment for the EU meant to act on the mandate of the people. Saying that, the UK gouvernment was and still is one of the strongest advocates for the worst and most undemoctratic parts of the deals. The media in cahoots with big business keeps schtum about all these things so the public won’t notice how money gets further shifted from the bottom to the top and democracy further undermined. Climate change will be non reversible as another side effect. ‘The trouble with TTIP’ and ‘Sell off – The abolition of the NHS’ are films on the internet worth watching for those interested in their own future and that of their children.