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Leaked immigration document: How will start-ups and small firms be affected?

A Home Office paper outlining the future of EU migrant workers in post-Brexit Britain has been circulated. Startups explores what it means for businesses

The future of EU immigrant employees in post-Brexit Britain has been revealed, after a leaked Home Office document outlined the government’s proposals to reduce the number of migrant workers in the UK.

What does the leaked immigration document potentially mean for start-ups and small businesses?

Obtained by The Guardian, the 82-page document, which is marked as extremely sensitive and dated August 2017, outlines that the free movement of labour will end once the UK officially leaves the European Union next year..

Under the proposed immigration changes in Border, Immigration and Citizenship System, ‘low-skilled’ EU migrants will be offered a maximum residency of just two years, with ‘high-skilled’ workers able to stay and work for a longer period of between three and five years.

Hoping to strongly encourage start-ups and small businesses to focus recruitment on ‘resident labour’ as opposed to foreign employees, it’s hoped the restriction in EU immigration will allow more unemployed Britons to avail of the low-skilled jobs generally attributed to migrants.

The document reads:

“It is not a question of stopping EU migration. But there will be a fundamental shift in our policy in that the government will take a view on the economic and social needs of the country as regards migration, rather than leaving this decision entirely to EU citizens and their employers.”

In contrast to the EU’s free movement directive, which states that any EU migrant can receive permanent resident rights if they live in another member state for five years, jobseekers will no longer be granted permanent residency.

While a specific “income threshold” will be introduced for “self-sufficient” migrants to prove their value to the UK economy.

To ensure all small businesses adhere to the new rules, ‘right to work checks’ will be introduced with business owners required to to carry out the necessary checks themseleves.

Businesses found to be employing any illegal workers could be criminally prosecuted.

It’s also suggested that a temporary implementation period for “at least two years” will be introduced after the UK officially leaves the EU, with the full immigration policy for EU nationals following after.

Other measures in the leaked document include: 

  • All EU nationals will be required to present their passport when entering the UK
  • EU rules on the rights of extended family members to reside in the UK will be scrapped
  • EU nationals must earn at least £18,600 a year if they wish to bring their non-EU spouse to the UK

What type of UK businesses could be affected?

Not surprisingly, start-ups and small businesses who employ or rely on ‘low-skilled’ foreign employees will certainly be interested in the apparent decision to end the free movement of labour once the UK leaves the EU.

In numbers, Polish nationals (916,000) lead the way in terms of EU migrants currently living in the UK, followed by Irish (300,000), Romanian (300,000) and Portuguese (220,000).

However, a chapter entitled Protecting our strong and historic ties with Ireland, seems to indicate free movement between UK and Irish nationals will remain.

According to the Migration Observatory at the University of Oxford, the employment rate for migrants has been lower than that of UK-born individuals since 1993.

However in recent years, the difference between migrant and UK-born employment rates has narrowed for men, yet stayed constant among women.

Further statistics indicate that greater shares of foreign-born workers are employed in the two lowest paid occupations: ‘elementary’ (e.g. cleaners, kitchen and catering assistants) and ‘processing’ occupations (e.g. transport drivers, food and drink process operators), compared to UK-born men.

About 30% of foreign-born workers were employed in elementary and processing occupations compared to 20% of their UK-born counterparts

So, what are the main types of businesses who could potentially lose access to talent?

Hospitality businesses: Small businesses owners in the hospitality and services sector, such as pubs, restaurants, cafes, chip shops and street-food stalls have all traditionally relied on EU migrant work. According to research by accountancy firm KPMG, hospitality businesses need at least 60,000 new EU workers a year in order to fill vacancies.

Trade businesses: Trade businesses such as an electrical firmpainter decorators and carpentry businesses are a popular destination for low-skilled manual workers, and as a result, employ many migrant workers both from the EU and elsewhere. According to the Construction Industry Training Board, one in three construction firms employ migrant workers.

Gig economy businesses: Tech start-ups and small businesses that operate within the gig economy, such as on-demand taxi, take away, laundry and cleaning services, often rely on freelance delivery drivers or ‘gig economy workers’.

Retailers: Retail businesses such as hairdressers, corner shops, clothing shops and gift shops will all lose access to foreign workers. Statistics show that around 761,000 foreign workers are employed in the retail and restaurant trade in the UK.

Will UK businesses have to increase staff wages if they employ more UK-born staff and fewer migrants?

UK-born worker’s wages have exceeded those of migrants since 2005. This is likely due to the fact a higher number of migrants are employed in lower skilled occupations, and thus, earn a lower hourly wage.

Whether UK businesses will need to increase wages to recruit UK workers, as opposed to migrants, remains to be seen – but will be something businesses will now need to strongly consider and plan ahead for.

A start-up’s reaction to the leaked immigration document

Avin Rabheru of Housekeep

To assess the mood among the start-up community and small business space, spoke to Avin Rabheru of award-winning on-demand cleaning start-up Housekeep.

The Young Gun-founded business operates within the £10bn UK cleaning market, with many EU cleaners available on the platform.

What is your reaction to the leak?

“We’re not surprised by the news, but we are disappointed.”

We knew that such decisions were likely, but faced with the leaked proposals, how will your businesses cope?

“We’re a young, growing business so handling complexity and uncertainty is what we do. Of course, we’ll overcome this challenge but more complexity and uncertainty hurts British businesses and undermines investor confidence.”

Do you believe British workers (or the unemployed) will really pursue these jobs, as is claimed in the document?

“The proposed policy is to reduce low-skilled immigration but keep high-skilled immigration – so, isn’t this the proposal saying ‘low-skilled jobs for British workers and high-skilled jobs for non-British workers’?

“Surely, we should be seeking to reduce, not increase, social divisions and we should be improving the skills of British workers to take on high-skilled jobs and boost productivity.”

How could the demise of the free movement of labour impact your recruitment plans going forward?

“Customer bookings have grown threefold over the last year and EU nationals make up half of applicants – British applicants alone aren’t going to be sufficient to keep pace with this growing demand.

“High-growth businesses like Housekeep have repeatedly proven to be the most productive drivers of economic growth and job creation; this policy would damage that.”

Do you think the government’s proposals could ultimately strengthen Britain’s workforce?

“The reality is that demand for house cleaning isn’t going to change. The pool of applicants is already shrinking so the best cleaners are already expecting higher hourly rates. It’s simple, really as demand is growing, supply is shrinking and that means hourly prices will go up.

“Indeed, this is the case in many other markets, such as the US or Australia – consumer demand is similar but hourly prices are much higher. That’s how we expect the UK market to evolve over time.

“Ultimately, adding complexity, regulation and bureaucracy will favour Housekeep in the long-term. We’re set up to operate at scale so already follow the proposed processes, for example, we’ve carried out Right to Work checks since day one. This should mean our proposition is even more compelling than today.”

What do you think of the goverment’s proposals for post-Brexit Britain? Share your thoughts in the comment box below or Tweet us @startupstowers.