In a week when coronavirus has dominated the news, we have been reminded of how interconnected the world is. Not only have recent events reminded us of the links that exist in global markets and complicated supply chains, but also just how mobile the world’s population is.
This mass movement of people is something we’ve become accustomed to. For some time now, executives in the consumer-facing industries have been able to focus their attention on the big strategic challenges of their business, taking the security of the labour market for granted to some extent. However, the government’s recently-announced immigration policy looks set to shake this up.
The post-Brexit changes to our immigration laws have sent ripples through the consumer-facing industry and beyond, representing the most significant government intervention into the labour market in decades. But what does it mean for our sector, and what does it tell us about the government’s relationship with UK businesses?
The new system, introduced last Wednesday and set to be implemented from January 2021, is designed to create a high wage, high-skill, high productivity economy. The thinking behind the regime is that the UK’s economic model needs a refresh. Real wages – earnings adjusted for the impact of inflation – have only just surpassed the level they were at during the 2008 recession. Employment is at an all-time high but investment and productivity levels are low. This policy change reflects the government’s thinking that businesses would rather hire low-cost labour from eastern Europe than invest in new equipment or measures to hike up productivity.
To counter this, the new Immigration Bill encourages businesses to employ only ‘the best and the brightest’ talent from around the world. The ‘points-based’ system ends free movement, opening the borders for high-paid, qualified individuals from EU and non-EU countries and denying UK access for those the government deems ‘low-skilled’. To be eligible to apply to come to the UK, an overseas citizen will need to secure 70 points, which they can do through receiving a job offer (20 points), applying for a skilled job (20 points), being able to speak English (10 points) and – in most cases – earning a salary of £25,600 or above (20 points).
On the one hand, this will result in the removal of the cap on skilled workers entering the country; lowering the qualifications and salary required by skilled workers to obtain a visa; and scrapping the ‘resident labour market test’ – an obligatory test currently undertaken by employers to prove there is not a suitable British candidate for a role if hiring a skilled worker from overseas. This is good news for the UK’s technology companies, which will have more freedom to import highly skilled, well-paid digital talent from India and the US. The move can also be seen as a recognition of the UK as a key market for international talent and technological innovation, ensuring the country remains of interest to global investors.
However, the other side of the coin is less positive. Under the new system, migrant workers whom the government identifies as ‘low-skilled’ will be refused entry to the UK if they fail to meet the ‘points’ required. This change is not only controversial morally, but will significantly disrupt the consumer-facing sector, where much of the wider workforce is made up of ‘low-skilled’ staff from overseas.
The new approach has garnered a significant response from the mainstream media and our sector’s trade bodies. Proponents of the regime praise its focus on productivity and its commitment to domestic labour, while opponents wonder how businesses in the care, hospitality, food and drink sectors will manage. In hospitality, for example, a report by KPMG and UKHospitality predicted that between 12.3% and 23.7% of the sector’s workforce is made up for EU migrants.
Lobby groups have already submitted warnings that the new law will lead to labour shortages, a lower standard of care for the elderly and higher prices for consumers. Statements from the consumer-facing sector’s industry bodies have largely reflected this.
The Food and Drink Federation, for example, noted the shortcomings of the skills-based system, stating that: “We have concerns about access to those potential employees who won’t qualify through these ‘skilled’ routes such as bakery assistants, meat processors, and workers essential to the production of huge array of basic foodstuffs”.
UKHospitality took a strong view on the matter and pointed to the short time-frame: “Ruling out a temporary, low-skilled route for migration in just 10 months’ time will be disastrous for the hospitality sector and the British people. Business must be given time to adapt. These proposals will cut off future growth and expansion and deter investment in Britain’s high streets. It will lead to reduced levels of service for customers and business closures.”
The British Retail Consortium took a similar stance, and also pointed out the increased recruitment costs for businesses: “Although we welcome the reduction in the salary threshold, it is disappointing that the Government has not understood the needs of the economy and the vital contribution of workers supporting the operation of warehouses, food factories and city centre stores. When vacancies cannot be filled from the local labour market, businesses must be able to recruit from the widest talent pool available across all skill levels. We continue to call for a system that enables straight-forward recruitment from a range of skill levels and avoids significant increases to the cost of employment.”
In its introduction to the new law, the Home Office writes that freedom of movement fails to “meet the need of the British people.” Whatever your view on this assertion, the response from the consumer-sector’s trade bodies raises questions about whether the government’s new regime fails to meet the needs of British businesses.
Looking forward, UK business leaders will have to brace for change and re-think their long-term workforce strategies. The policy document says that organisations should focus on “staff retention, productivity and wider investment in technology and automation.” As such, it is possible that the UK will see innovation in AI, technology and automation develop with renewed vigour, as businesses find tech-led solutions to their labour shortage. As noted by the FDF, however, replacing human efforts with robotic or AI-driven machines is not a quick-fix: “While we are committed to promoting the use of automation and technology in our sector, the benefits of such innovations will not be felt overnight and some food chain roles remain challenging to automate.” This is especially true in areas such as fruit picking and meat manufacturing, where natural inconsistencies in the size, weight, and location of products render automation difficult to achieve.
Moreover, Home Secretary Priti Patel has also noted the need for businesses to invest in domestic training programmes to upskill the 8.6 million UK residents who are currently ‘economically inactive’. Critics assert that this is not only fundamentally flawed (the Office for National Statistics says that only 1.87 million of those residents are able and willing to work) but also poses a significant issue for UK businesses, which will have to scramble to attract the relatively small pool of potential domestic workers.
At the beginning of February, we published a column discussing whether businesses in our sector are getting their voices heard post-Brexit. By looking at media coverage on Brexit and on the decisions that will most affect our sector, we explored the need for organisations to cut through the noise and make their needs clear. This latest piece of post-Brexit policy, and its relatively low coverage in the press, demonstrates that this will be an ongoing challenge.
It is perhaps surprising that this Immigration Bill is going ahead – despite direct warnings from businesses in our space (such as Pret A Manger, who said two years ago that only one in 50 job applicants were British) – and is reflective of the challenge ahead for the consumer-facing sector.
Looking forward, this next phase of adjustment will require leaders to not only to handle the scale and pace of change demanded by the Immigration Bill, but also to think carefully and broadly about how to ensure that the UK government is listening to the voice of the consumer-facing industry.
Moira.benigson@thembsgroup.co.uk | @MoiraBenigson | @TheMBSGroup