Financial services remain highly dependent on the ability to hire highly-skilled talent from across the world.
With a new immigration system imminent, the future success and sustainability of the UK’s FS sector will be reliant on post-Brexit immigration rules that support and enable global competitiveness.
End of EU free movement
While EU and UK citizens do not need a residence visa and work permit today to live and work in the UK and in Europe, this will change after the Brexit transition period ends on 31st December 2020.
For non-EU citizens living and working in the UK, little will change after Brexit from an immigration and mobility perspective, as they currently need visas and permits to work in the UK or the rest of the EU.
With critical shortages of digital skills in areas such as programming, statistical analysis as well as emerging areas like machine learning, the sector has turned to international talent to plug the gaps. Yet the imminent introduction of a new UK immigration system and the government’s hardline approach to immigration are fuelling concerns among UK tech companies that more skills shortages are ahead since fewer people will be attracted to the UK and it is likely to be harder to bring in enough people.
The end of EU free movement of labour in December 2020 is one of the biggest challenges facing UK tech companies. The impact on UK workforce planning cannot be underestimated. After this date, non-UK resident EU citizens wanting to come to the UK to work will need to apply for permission to enter and work in the same way as non-EEA nationals.
Tech talent is extremely valuable and hard to find, demanding significant time and cost investment in looking for the right people and nurturing those relationships. Yet with countries such as Canada and Australia taking a more open and welcoming approach to economic migrants, post-referendum Britain has UK tech companies are labouring against a decline in appeal of the UK as a destination for tech workers.
While the detail of the future immigration system eludes, employers should be gearing for 2021 and the end of EU free movement when all migrants, regardless of nationality, must qualify for permission in some way under a skills-based regime to work in the UK. This will necessarily incur Home Office and professional fees to apply and secure the relevant visa.
Tech companies must consider now the impact of the changes, along with the introduction of a new points-based immigration system for 2021, on their recruitment strategies and budgets.
London, much like Silicon Valley, benefits from a critical mass of world-class, industry-specific talent living and working in close proximity. Disruptions such as visa uncertainty for foreign employees and near-term job-loss prospects could cause top talent to go elsewhere.
Given the new system is to be centred on skills over nationality, any shortages in lower-skilled EU workers may not appear to be of direct concern to the FS sector, which typically employs skilled workers, the broader trend and momentum of a talent exodus and repellant may well impact.
The crux of it all is that talent is mobile, and whilst London currently provides the perfect set of factors to attract top talent, there are several other decent-looking alternatives ready to bite at its heals should Brexit start taking its toll.
While the EU settlement scheme offers those EU citizens currently in the UK protection over their immigration rights, EU employee attrition in the UK has increased since the referendum result as EU citizens opt to leave the UK, its uncertain future and hostile environment. UK employers are being urged to encrouage their EU workers to register for the EU settlement scheme in advance of the deadline to safeguard their status post-Brexit. Settled status registration numbers however remain far short of 100%, creating further uncertainty for UK employers over their ability to retain EU workers.
UK firms are already choosing to grow their operations within EU member countries, not only to ensure compliance with the bloc’s rules, but also to be nearer to where regulatory and political decisions are made.
Countering competitive advantage
The current UK immigration systems lacks flexibility and agility, undermining any efforts by UK companies to respond quickly to commercial opportunities by bringing in international talent. This requires significant understanding of the routes available and the requirements on the employer and the applicant to avoid issues or delays at the application stage.
Complex fee structures and high fee levels are also a factor for UK employers. At present, the Rest of World migration system consists of a plethora of fees which are difficult to navigate for both the employer and individual, including for example the NHS surcharge and employer need for a resident labour market test.
In the event of a no-deal exit, and without any special arrangement between the UK and the EU, Brexit is likely to increase immigration and compliance costs for employers and commuters. In addition to the UK aspect of such costs, an assessment will need to be made of immigration and compliance costs in destination jurisdictions.
Limited appeal & routes for financial entrepreneurs
It has become increasingly difficult for non-UK entrepreneurs to come to the UK to set up business, such as fintech companies or challenger banks. Following the closure of the Tier 1 Entrepreneur visa route in March 2019, and the introduction of the new Start Up route for first time business owners, and the Innovator route for more experienced business owners, applications from migrant business owners to come to the UK to either invest in or establish businesses have plummeted.
The new routes it seems have yet to gain traction or show appeal to international entrepreneurs. This is being attributed in good part to a lag in implementing the new endorsement and application process, which required government-appointed endorsing bodies to assume responsibility for approving business credentials and viability.
The UK has traditionally attracted the lion’s share of money invested in fintech in Europe, but initial indications are that these new immigration routes will impact tech sector growth and the prevalence of foreign start ups in the UK.
DavidsonMorris are established advisers to the financial services sector. As employment solutions lawyers, we work with financial services companies to support with their full people requirements including immigration & employment legal advice and global mobility & human resource consultancy.
We understand the commercial and legal challenges facing businesses in the FS sector, and work to support our clients in meeting their people management and planning needs while reducing legal risk exposure. Contact our finance sector specialists today.
Last updated: 2nd January 2020