The Brexit trade and security deal was finalised on December 24th. Running to 2000 pages, the deal sought to establish how trade and services could be maintained now that the UK has left the EU. With this in mind, the wider implications of the UK quitting both the EU’s single market of 450 million customers along with its customs union are as yet unknown. While many of the details will need to be worked out in the coming months, we take a preliminary look at some of the agreement’s main points and how they might affect the contracting sector.
Trade tariffs: The deal ensures that the UK continues to have tariff-free and quota-free access to one of the world’s biggest markets, however there’s still a lot of new bureaucracy around trade to negotiate. From 1 January 2021, goods entering the EU from Great Britain face large amounts of new paperwork and checks around border controls. Disruption caused by Covid-19 has highlighted just how dependent the UK economy is on trade across the English Channel. This has meant that businesses have already started to diversify their supply chains towards domestic product and manufacturing.
According to an industry report, UK Retailers plan to on-shore £4.2 billion of products to the UK over the next 12 months. The changes are creating new growth opportunities for the UK economy and new jobs, while also protecting against future risk. Contractors working in the retail, manufacturing, logistics and transportation sector will be helping companies adjust to the new online retail environment and the massive shift in the production and distribution of goods.
Service Sector: One of the deal’s major shortcomings is that it focuses mostly on goods and does not cover the service sector. Data for 2018 showed that service exports in the UK accounted for some 46% of overall exports. The UK has also lost access to the EU’s Internal Market Information system, creating problems for service providers who depend on the ability to use data freely and interact with other experts, often across borders, to assist the company they work with.
The deal also means that there will be no more automatic recognition of qualifications for doctors, nurses, architects, dentists, pharmacists, vets and engineers. They will now have to seek recognition in the member state they wish to practise in. Continuity complications around taxation, benefits and pensions may also make the UK a less attractive option for EU workers. This could have significant repercussions for organisations such as the NHS, which traditionally draws a bank of its workers from EU countries. Given the current pandemic situation, the need for qualified medical locums and agency workers is high.
It may also have repercussions for those working in London’s finance sector, which accounts for about 80 percent of the British economy, and in the legal professions. Accountants and solicitors may find their qualifications are not suitable for existing contracts that run into 2021. This could mean terminating or renegotiating work assignments or contracts outside the UK. They could also find their freedom of movement severely restricted.
Freedom of movement: Another repercussion of the Brexit deal is that UK nationals no longer have the freedom to work in the EU and vice versa. Visas will be required for stays over 90 days. Those on short-term business will need a work permit and may stay for a period of up to 90 days in any 12-month period. Experts have warned that business travellers face fines unless they get advance authorisation once the UK leaves the single market.
The issues resulting from the end of freedom of movement are likely to result in widening skills gaps in high demand areas such as IT. European candidates currently make up a significant amount of the UK talent pool. While fewer European candidates might mean that competition for certain skills is fierce, driving up contractor rates, the restrictions placed on UK nationals travelling to Europe to work could go some way to readdressing the long-term balance.
IR35: Under the deal, reciprocal arrangements have been made “to facilitate short-term business trips and temporary secondments of highly-skilled employees”. However, the permission to be in-country under the “contractual services” and “independent professional” rules will generally only last as long as the relevant client project, with a 12-month time limit and the relevant worker needing a minimum amount of relevant specialist experience to qualify (around six years).
This will force many UK staffing and consultancy companies to rethink the basis on which they deploy UK contractors and consultants into EU states. The IR35 rules scheduled for introduction in April mean that organisations hiring or deploying contractors should be aware of how the terms of engagement will affect employment classification under the new legislation. For example, staff seconded to the EU on business can stay for up to three years if they are managers. However, many ‘interim managers’ and management consultants brought in to oversee change projects and transitional restructuring may fall inside IR35 based on the application of key status tests.
What should contractors do now?
- Build a pipeline of work in the UK
- Network to build knowledge and prepare
- Complete or renegotiate any long-term EU contracts
- Ensure IR35 compliancy with the reforms due in April
For more news on the sectors currently hiring read our article here. If you’re starting a new contract, ContractingWISE has access to a wide range of hassle-free services that can help you with setting up a limited company or finding the right umbrella company for you. To talk to a member of our team, call: 0203 642 8679