Blessing in disguise or a national wrong-turn: Brexit and the recruitment industry

A little like a ‘dead cat bounce’…!

Brexit is a polarising topic. Some believe it is a blessing which will enable the UK to control its borders and reset its trading relationship with the rest of the world. For others, it equates to nothing less than a national wrong turn, an ill-advised step which reflects an isolationist attitude that is at odds with a globalised world.

In something that now looks a little like a ‘dead cat bounce’ post Brexit, there was great optimism. However, as the wheels of government, the legislature and bureaucracy have grinded incredibly slowly, a new realism seems to be shaping the thoughts of large numbers of people that voted for Brexit.

Insight into what EU citizens in the UK think about Brexit

The idea that Brexit demonstrates a shift towards isolationism where globalisation is the order of our time, seems to be instrumental in shaping the views of many of the 2.4 million Europeans living and working in the UK.

A survey of 2,000 UK resident EU citizens by audit, tax and advisory firm KPMG revealed a little of what EU workers in the UK are thinking. The findings were released as ‘The Brexit effect on EU nationals’ report, and it showed 8% of EU citizens are planning to leave and another 35% are considering leaving.

The Food and Drink Federation (FDA) conducted a survey of the ‘farm-to-fork’ supply chain. It said 31% of businesses had already seen EU workers leave the UK. Representing the UK food industry the FDA warned that a third of the sector’s businesses could become unviable.

One critical data point that the survey revealed is that: 17% of firms may relocate overseas if they have no access to EU nationals.

Contraction of the UK recruitment sector

Extrapolating this across all sectors infers a 17% contraction (almost 1/6th) of the UK rec sector as UK firms relocate overseas. In reality it is unlikely to be this high as there are disproportionately high numbers of EU workers employed in the UK food industry. However, if a total contraction of 10% was experienced, this might create some issues.

One effect is it might increase competition in the market. The UK recruitment sector would find itself in a position of ‘over capacity’ where there are too many firms and recruiters, stiffening competition for clients.

Many EU workers are in knowledge-based occupations and are highly qualified. Brexit may produce something of a ‘brain drain’ effect that is likely to exacerbate the current skills shortage.

Overseas investment in UK recruitment

Another statistical source reveals some recruitment industry trends, however, it’s not so easy to theorise about their significance.

The BDO LLP Recruitment Sector Insights business intelligence report showed that investment into the UK from overseas buyers between 2012-16 accounted for 31% of all UK recruitment company sales. This is a complex trend and it’s hard to assess what might happen in a more competitive environment, where overseas investors feel that the UK is less welcoming than other potential territories.

If less overseas capital flowed in, would that have a detrimental effect? One potential negative might be that with less competition from buyers, at M&A time, it might make it more difficult for a recruitment business owner to exit and maximise the value of the business.

Whatever the way forward, one thing is clear ­– Brexit needs to proceed as quickly as possible. Uncertainty is leading to deferred investment decisions which is continuing to slow the tempo of business.

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See more on what EU workers think about Brexit by downloading the BDO Recruitment Sector Insights 2017 business intelligence report at bdo.co.uk