We are pleased to announce that Amy Cococcia, a partner in Fragomen’s New York office, will be featuring articles she writes as well as guest columns from other Fragomen attorneys around the world. This month, she presents an article from George Koureas, a partner in Fragomen’s London office, about the UK’s historic Brexit vote.
During one unprecedented week at the end of June, the British public voted for Brexit (the British exit from the European Union), Prime Minister David Cameron announced his resignation, a bid by backbenchers was launched to overthrow the leader of the Labour Party (the main opposition party in the UK), and the English national soccer team was unceremoniously knocked out of the Euro 2016 by competition debutants Iceland.
Whilst everybody knew Brexit was a possibility, nobody actually believed that the British public would vote to exit the EU. A couple of months on, and with a new prime minister at the helm, what do we know, and how is the UK fairing?
It is, of course, too early to determine what the mid- to long-term effects of the Brexit vote will be for the British people or its economy. In the immediate aftermath of the decision, the British pound slid sharply against the U.S. dollar, and one month later it currently sits just above a 30-year low at USD $1.31 to GBP £1. Whilst some U.S. businesses may rejoice at the discount in the cost of doing business in the UK, those with a UK presence and an international workforce will be acutely mindful of the ever-increasing immigration restrictions and costs announced before the Brexit vote, and the immigration hardships yet to come as a result.
The UK Home Office as recently as April of this year announced changes to the current UK points-based system (PBS), which are to be implemented in autumn 2016 and in April 2017. PBS is the framework within which non-European Economic Area (EEA) national migration, including migration by U.S. nationals, is managed. These changes include a significant overhaul of the current category through which existing staff can be transferred from overseas offices to a UK parent or subsidiary (Tier 2/Intra Company Transfer), the introduction of an apprenticeship levy of £1,000 per year for each year a migrant will be in the UK, and the broadening of the immigration health surcharge, currently £200 per migrant and per accompanying family member for each year they will be in the UK. Hence, the cost of sending a U.S. employee to the UK will potentially increase by £6,000 before government fees are even taken into account.
Theresa May, the UK’s new prime minister, was the UK’s jointly longest-serving home secretary and a supporter of David Cameron’s commitment to reduce net migration to the UK to less than 100,000 per year while she held that post. Since becoming prime minister, she has said “Brexit means Brexit,” but no one yet seems sure what Brexit means. Will the UK stay as a member of the EU single market? Will EU nationals retain the right to live and work in the UK? What economic impact has the Brexit vote had so far?
One thing that has been clarified is that there will be no cessation of the free movement of EU citizens to and from the UK until such time as the UK actually leaves the EU. In order for the process to commence, the UK must invoke Article 50 of the Lisbon Treaty, which is likely to take place in the autumn. Thereafter, the UK will have two years within which to negotiate the terms of its exit, and the period can be extended further subject to unanimous agreement by the remaining 27 member states.
Once Brexit occurs, it is likely that a revised immigration system would be introduced to manage both skilled and unskilled migration from all parts of the world, including the EU. This new system is likely to be based on the Australian points-based system, which though similar to the current UK system, places more emphasis on the skills and point-scoring ability of the migrant across a much broader range of skilled and unskilled roles.
Over the past few months, our firm has had many enquiries from understandably anxious EEA nationals who were concerned that they would be required to leave the UK immediately, followed closely by multinational corporations wishing to discuss strategies to be put in place in order to manage their EEA and non-EEA migrant population. Although the future is unclear, there are prudent steps businesses can take in order to draw up contingency plans and strategies to safeguard their position:
Know your staff: Beyond a day one right-to-work check, EEA nationals have been able to work freely in the UK without the need to secure work authorization. As such, employers have not generally recorded their right-to-work status. Undertaking an audit and determining how long your EEA staff have lived and worked in the UK will provide valuable data.
Develop a strategy: What will you do if your German CEO is unable to remain in the UK? What percentage of your workforce conducts business in Europe? What percentage of your European-based workforce conducts business in the UK? What impact will restrictions have on your business?
Who will you support? Will you support EEA staff in the UK with permanent residence applications, if they are eligible to apply? Will this depend on their seniority within the business? How about applications to naturalize as British nationals?
The EU referendum is the voice of the people, but it is not a legally binding decision. In the immediate aftermath, it has been suggested that that there may be an alternate deal presented to the British public by the government rather than an all-out Brexit, in order to safeguard the UK economy and maintain EU single-market access.
The one certainty is that no one is certain what will happen. It is prudent to draw up a strategy and have a plan. But for the time being at least, the very British message is to “keep calm and carry on.”
Published August 25, 2016.