It’s hard to have a conversation at the moment that doesn’t start with the weather and end with Brexit. Many of our clients and candidates are grappling daily with issues resulting from political instability, market uncertainty, an unpredictable and fluctuating currency, labour uncertainty and the supply chain issues that will undoubtedly arise from Brexit. Regardless of your political opinion, or where the current negotiations lead, these are definitely troubling times.
As executive search consultants, we see the emerging impact first-hand. Already, Brexit means that the UK is no longer as attractive a location for international candidates to consider moving to. Even though candidates are sure that sponsoring companies will be able to attain the relevant work visas post Brexit, emotionally, we have noticed, for instance, a particular reticence from European candidates – especially Germans – to consider roles in the UK at the moment. There has been much talk that any skilled workers will automatically get visas – however, there has been less clarity around what will happen to the spouses and children of those with working visas – and therefore, if the UK is the ‘right’ long term home for a family relocation. Historically, the UK has never had an issue attracting the brightest and the best international talent. Going forward, the UK will need to market itself better – possibly by offering the right skilled workers certain tax exemptions (such as in the Netherlands) – to ensure we attract the right talent into the market.
The new government needs to listen carefully to our sectors very specific talent requirements. For instance, KPMG forecasts that the UK hospitality sector needs 62,000 new EU migrants per year in order to maintain its current activities and grow. 90% of these roles will not meet the proposed £30,000 salary threshold for overseas workers – and as IHG’s CEO Keith Barr observes, this includes many skilled roles, such as a multilingual concierge or a chef de partie in a hotel kitchen. Barr concludes: “A thoughtful, pragmatic approach is required to avoid a damaging shortage of skills, labour and the rich cultural mix that makes our industry, and the UK, so special.”
In FMCG, the UK has also traditionally been the obvious location for EMEA headquarters – especially for English speaking global FMCG companies. Now, many global corporations are seriously considering shifting their EMEA HQs to other centres within the EU – in particular, to Amsterdam and Rotterdam. Even at this late stage in the Brexit process, many companies have held off on making final decisions and have instead been shifting certain core functions of their businesses, where having a physical base inside the EU would be logical (i.e. when there are specific EU related aspects to a role). These functions include public affairs, legal and HR. Additionally, certain brand and marketing functions may also move in the future as some companies who have advantageous tax structures to holding brand IP within the EU may look to physically migrate decision making about these ‘brands’ out of Britain. Ultimately, this may mean brand, marketing and commercial teams will also have to physically move – in much the same way that The Netherlands and Dublin attracted a number of FMCG companies due to lower corporation taxes within the EU. Could we also be at risk of losing a critical mass of brand and commercial talent?
Much of the most immediate firefighting and stress in the next few months is, however, likely to fall on the shoulders of Supply Chain, Logistics and Manufacturing Directors. Obviously, one of the most pressing concerns that our sector is expressing is being prevented from moving goods on and around 31st October 2019. As we all know, the EU is the UK’s largest trading partner, accounting for approximately half of both imports and exports of goods. Of this, a large proportion of the UK’s imports from and exports to the EU are in the form of intermediary products – an indicator of the high degree of interconnectedness between UK and EU supply chains. As we approach the October deadline, businesses will already be increasing stock levels for Christmas and New Year, meaning warehouse space – and in some businesses, the lack of working capital is putting a major strain on business resources at the busiest time of year.
Ferrero, for example, has 5,000 trucks a year arriving in the UK from all over Europe. Mr Kipling and Bisto owner Premier Foods has recently committed an additional £10m for its contingency planning, which includes stockpiling of ingredients. Of course, perishable goods will suffer disproportionately from the increased time needed to cross borders – to say nothing to possible decreased competitiveness through tariffs in the event of ‘no deal’.
Additionally, certain manufacturing processes and ‘conformity assessment’ may need to change before or shortly after Brexit to comply with EU essential requirements. Several of which, labelling for instance, are likely to become increasingly more complex in the coming months: medicines, pharmaceutical, cosmetics, food and toys – all being particularly complex.
Our newly appointed politicians have a herculean task ahead of them. Our sectors have very specific needs to avoid potential disaster – and if these requirements aren’t prioritised in the coming months, lasting damage to the UK’s consumer industries is very likely.
In the meantime, businesses should be asking themselves how they best support their leadership through the next period of turmoil and complexity. When we get to Christmas, I think some of our leaders – in particular in supply chain and HR, at the coalface of these issues – will deserve a more generous than usual bonus!