Impact of Brexit on International Talent Mobility

August 10, 20168:20 am428 views

Brexit will impact employment but most likely in a gradual way. Many organisations seem to be postponing or cancelling projects but this may be a temporary effect, assuming the economy doesn’t contract too much.

“Companies will be operating in a state of limbo until there is greater clarity on Brexit,” says Lee Quane, Regional Director – Asia, ECA International in an exclusive interview with HR in Asia. Read on…

  • Has Brexit impacted global talent mobility? If yes, how severe has its impact been felt in APAC markets and businesses in the region?

It’s too early to tell the extent of the impact Brexit will have on global mobility, particularly as it hasn’t actually happened yet, but ECA’s Managing Mobility Survey 2016 (conducted in the run-up to Brexit vote) provided evidence that the threat of it was a deep concern globally.

Only 44% of participating companies predicted that long-term international assignments would grow in the next three years, versus 66% that predicted the same in our 2012 version of the survey.

Lee Quane, Regional Director - Asia, ECA International

Lee Quane, Regional Director – Asia, ECA International

Companies based in Asia were more bullish on international growth, and consequently, on their international expansion plans – as compared to companies based in Europe, which are more directly affected by the potential of Brexit.

Anecdotal evidence suggests that many companies worldwide are reining in investments, lowering salary increases and postponing projects because of Brexit, but no hard data is available on this yet. Furthermore, the extent of which, Brexit may impact companies in Asia will depend on their exposure to the European economy.

  • With economic volatility and political uncertainty experienced by different countries across the globe particularly now by the UK and EU, how can companies typically manage costs during times of economic downturn? Are layoffs and restructuring one of the best suited ways to lead towards the future?

It was surprising during the aftermath of the global financial crisis, especially in UK and US that many companies did not lay off more international assignees and other workers. Many took a ‘wait and see’ approach and/or reduced hours, rather than losing skills and experience that in most cases they had invested in.

A similar approach is likely to follow the post-Brexit vote, at least until a fuller picture of its impact emerges. However, such flexibility is not available in every country, especially those with more rigid labour-market regulations where it is difficult to cut contracted hours – making it more likely that workers will be laid off (where regulations allow).

  • Would Asia have to sign direct FTAs (Free Trade Agreements) with the UK instead of signing with the EU going further, post Brexit?

This would depend entirely on the leaving deal that is negotiated between the UK and EU. If the UK re-joins the European Free Trade Association (EFTA) then it should have access to the agreements already in place between EFTA and specific states/groups (Asian examples include HK, Korea Republic, Philippines and Singapore).

EFTA member states work together to forge new trade deals and so the UK would be in a similar position, regarding trade deals, as if it were to remain in the EU. Other Asian states would have to negotiate new bilateral deals with the UK. If the UK decided not to join the EFTA (or EEA) then it would have to negotiate new deals with most countries.

  • How will liberalisation and regulation of markets impact foreign trade and international talent mobility in South East Asia?

This is already being seen in the ASEAN Economic Community (AEC) which has been in operation since 2015. It is designed to promote the free flow of investment, goods and services and labour.

Reducing tariff barriers between countries promotes trade and cross-border investment, which is evident in the success of the European Union towards fostering trade amongst countries in Europe over the course of the past 50 years.

Therefore, in principle, the proposed liberalisation of markets in ASEAN brought on by the AEC will hopefully accelerate the economic investment of companies in Singapore into Indonesia, Thailand into Myanmar, Vietnam into Laos and so on.

In principle, the freedom of movement will also benefit countries. However, most countries within the AEC have remained reluctant to lower the barriers to labour mobility at this point in time.

See: Singapore Ranks Second among 109 countries in International Talent Mobility and Global Competitiveness

  • Are businesses in Singapore reconsidering their investments in UK and EU, how will this impact companies grappling with economic growth, could this mean lower wage increases and fewer job opportunities?

The UK is the gateway for many companies in Singapore into Europe. As mentioned above, the next steps following the UK’s vote to leave the European Union are still undefined. Until there is clarity, most foreign companies, including those headquartered in Singapore, with investments in the UK will take a wait and see approach.

It is unlikely that many companies will expand their operations in the UK or Europe until there is clarity. Therefore, we are more likely to see companies operating in a state of limbo until there is greater clarity.

  • Suggest some proactive measures to be taken by HR professionals, who are key drivers of business growth to ensure that this protracted period of uncertainty does not dent employers’ confidence in their ability to hire, and employees’ confidence about their job security?

This will really depend on the company. If the company is not exposed directly to Europe, its employees are less likely to be affected by the anticipated economic downturn in both the UK and the EU by the Brexit vote. However, companies that are more directly exposed will likely be cautious in their hiring plans for the next 12-24 months.

These companies are more likely to enforce hiring freezes and, as their revenues are likely to be impacted by Brexit, may find themselves offering lower salary increases than those companies who are less affected.

Therefore, it is important for HR professionals to take an active role in communicating to employees why Brexit impacts the company and, ultimately, their colleagues so they are aware of the pressures that a company may be under in terms of headcount and compensation.

  • How has the fluctuation of pound impacted on cost of living for expats in Asia? Which are the countries in Asia most expensive for expat living and those which employers should reconsider to globalise talent mobility?

Our latest data shows that the most expensive locations in Asia for expatriates are locations in Japan, Hong Kong, China, Korea Republic followed by Singapore.

The extent to which the salary of an employee from the UK working anywhere in Asia will be affected by the current weakness of Sterling, depends on how the employee’s salary is quoted and any measures that the company may have to protect employees from currency volatility.

It will also depend on whether a UK expatriate actually has any financial commitments in the UK. For example, a Brit who has been living in Singapore for 20 years, is paid in SGD and has his/her financial commitments in Singapore will be unaffected by the fall in the value of Sterling.

However, an international assignee from the UK who has been in Singapore for 1 year and whose salary is paid in GBP may require assistance from the company in order to ensure that his/her purchasing power remains unaffected by the volatility of Sterling. And there are many ways in which a company can do this.

  • How can organisations cope with restrictions on talent immigration, severe skilled labour shortage and meet business requirements in these cloudy political weathers?

Most companies in Asia sending staff to work at their operations in the UK and European Union will send skilled employees.

Governments throughout the world understand that these people add value to their economies as they are often responsible for overseeing the operations of companies that employ large numbers of local colleagues and provide important employment and development opportunities for local colleagues.

Therefore, it is unlikely that there will be a limitation on the mobility of talented, experienced employees into, out of, or within Asia in the near future.

  • Do you foresee huge employment shifts in the months to come? If yes, indicate which sectors would be most impacted by Brexit and those which will be beneficiaries to the new regime?

Brexit will impact employment but most likely in a gradual way. Many organisations seem to be postponing or cancelling projects but this may be a temporary effect, assuming the economy doesn’t contract too much.

Many analysts are predicting a UK recession in 2017, but not all analysts by any means. Brexit will almost certainly keep UK wages down, at least initially, but inflation is likely to rise because of higher import prices (due to weaker pound), and that could put some upward pressure on pay.

British export companies may get a boost in trade from the weaker pound, and tourism will certainly benefit. It is possible that foreign buyers of British property will also be encouraged, which could lift prices.

However, many analysts expect the off-putting factor of economic uncertainty, due to Brexit, to be more powerful than the draw of reduced property prices caused by exchange rates.

Also read: International Talent Mobility: Understand the Challenges, Considerations and Strategies from Lee Quane

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