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IMPACT – MEDIUM
Net migration to the United Kingdom has fallen to 230,000, the lowest level since 2014, according to the Office for National Statistics’ quarterly migration numbers.
Key figures:
BAL Analysis: The historic decline in net migration may be an indication that EU nationals are leaving the U.K. at least in part due to the uncertainties caused by Brexit, and appears to reinforce business concerns of a drop in available skills and the availability of talent.
This alert has been provided by the BAL Global Practice group in the United Kingdom. For additional information, please contact uk@bal.com.
Copyright © 2017 Berry Appleman & Leiden LLP. All rights reserved. Reprinting or digital redistribution to the public is permitted only with the express written permission of Berry Appleman & Leiden LLP. For inquiries please contact copyright@bal.com.
The following is a roundup of recent developments concerning Brexit negotiations and the United Kingdom’s withdrawal from the European Union.
News Summary
At the EU leaders’ summit this month, British Prime Minister Theresa May got a political boost from German Chancellor Angela Merkel, who acknowledged that “both sides need to move” on Brexit talks and downplayed concerns about the pace of negotiations by saying that a deal will be reached by the deadline of March 2019. It is hoped that the softening tone will break the impasse and help bring an early resolution to the issue of EU citizens’ rights and immigration before trade negotiations begin.
At home, where May faces mounting pressure to deliver, the Migration Advisory Committee has closed its call for public comments on EU migration and a post-Brexit immigration system. In response to the call for evidence, BAL has submitted a consolidated response on behalf of clients, highlighting U.K. companies’ reliance on EU workers, the need for continued access to EU talent and why a one-size-fits-all immigration system would hurt U.K. businesses.
While the EU readies to negotiate its future trade relations with the U.K. post-Brexit, on the other side of the Atlantic, Canada and the EU have concluded a major trade deal that eases mobility into the EU for Canadian professionals and could signal how the U.K. approaches immigration and trade relations in the future.
Politics
Will Merkel’s backing of May help settle immigration issue?
Merkel’s backing of May at the EU summit represents a new pragmatism in negotiations that could push key issues over the finish line before phase two of negotiations begins. On immigration, Merkel’s cooperation could be a positive signal that the EU and U.K. may be able to smooth over their remaining differences by early next year, rather than prolong debate over immigration until negotiators begin to tackle trade talks. An agreement on immigration now hinges on a few key issues, such as the length of the transition period after Brexit (two to four years), whether EU nationals in the U.K. can access the European Court of Justice, whether EU nationals who already hold permanent residency will need to apply for settled status, and how family members of EU nationals will be treated post-Brexit.
Immigration
‘First big Brexit win’?
A deal is “imminent” to preserve the Common Travel Area (CTA) arrangement between Ireland and the U.K., according to Ireland’s Minister of Foreign Affairs Simon Coveney, who hailed it as the “first big win of Brexit.” The agreement is not a surprise, as the EU and U.K. both signaled at the outset their desire to keep the status quo. Continuation of the CTA would retain free movement for Irish and U.K. citizens, but does not resolve the difficult issues involving formation of a hard border between Ireland and Northern Ireland and resulting impacts on trade and customs. For in-depth analysis of the key Brexit issues involving Ireland, read BAL’s White Paper “Brexit: What’s at Stake for Ireland?”
EU-Canada trade agreement: future of free movement?
The EU has provisionally implemented a major trade deal with Canada that liberalizes trade and mobility for several categories of high-skilled professionals, including intracompany transfers, business visitors, service providers under contract, and investors. Under the Canada-EU Comprehensive Economic and Trade Agreement (CETA), which Theresa May supports, the U.K. would make concessions on immigration in exchange for significant trade deregulation. The deal could be a blueprint for how trade and immigration are linked within bilateral agreements post-Brexit.
BAL responds to MAC call for evidence After meeting with members of the Migration Advisory Committee in London in October, BAL has formally responded to the committee’s call for evidence on EU migration and UK’s post-Brexit immigration system. In its letter to the MAC, BAL has included feedback from U.K. companies based on BAL surveying data that employers, particularly in the IT sector, have seen worrying concerns from EU national employees and job recruits about the overall impact of Brexit, the reduction in interest in response to U.K. job vacancies, and specific concerns about the status of their family members and whether London will continue to be an attractive place to work. Companies have also reported the skills gaps in the U.K. workforce that EU nationals currently fill and that they advocate revisions to the shortage occupations lists to include several roles in the IT industry, including software engineers, senior engineers, data scientists, and others.
EU nationals in the UK
While the MAC prepares its report, the U.K. government may have already predetermined its approach to the status of EU nationals. According to its proposed plan, eligible EU nationals will need to register with U.K. immigration authorities and apply for “settled status.” After a transition period, those EU nationals not eligible for either settled status or limited leave to remain would have to qualify for residence permits based on their skills, with high-skilled EU workers being eligible for three- to five-year permits and low-skilled EU workers being limited to a maximum of two years. One issue that remains in dispute is how long the transition period will last, during which EU nationals would be allowed to continue to live and work in the U.K. The transition period is intended to avoid a cliff edge and provide time for businesses and EU nationals to plan for new immigration rules. The U.K. government’s proposal indicated the transition period would last two years. The biggest sticking point with the EU is likely to concern access to the ECJ and also the continuing rights of EU nationals during transition and beyond – for example, the ability of certain family members (e.g., children over 18 and parents or grandparents of EU nationals) to join their U.K.-based EU national family member.
Preparing Your Company
The results of BAL’s two surveys and our engagement with clients about Brexit indicate that companies and EEA employees remain anxious about their future mobility, their families’ status and the potential for changing hiring practices by U.K. companies as a result of Brexit.
As the post-Brexit immigration requirements for EEA nationals become clearer, companies should work with their BAL professionals to plan best strategies for their EEA populations. BAL continues to recommend that companies keep close track of their European workforce needs, including their current numbers of EEA national employees, the roles they fill, time in the U.K., tenure with the company, and skills and salary levels. BAL can assist in assessing and tracking the necessary data for a smooth transition after Brexit.
Should you have any questions or require more information on how BAL can help with Brexit planning, please contact us at uk@bal.com.
The Migration Advisory Committee, a nonpartisan panel of economists, has been commissioned by the U.K. government to research and provide its recommendations on EU/EEA migration to the U.K., its effects on the domestic labor market and the most suitable post-Brexit immigration system for the U.K.’s economic strategy. The MAC is seeking public comments from immigration stakeholders by Oct. 27 and is expected to publish a full report by September 2018.
In the first of a series of Brexit policy papers to be released in coming days, the U.K. government today released its proposal for an interim customs union that would be a temporary measure when the U.K. leaves the EU in March 2019 to avoid the sudden imposition of trade barriers and prevent a hard border between Ireland and Northern Ireland. However, the U.K. would seek the right to negotiate bilateral trade deals with individual countries during the interim period – something currently prohibited by the EU Customs Union.
Many companies are not waiting for negotiators to reach agreement on trade and are putting plans into action to allow them to operate in post-Brexit Europe – moving headquarters or certain operations from the U.K. to elsewhere in Europe to protect against a hard break with Europe that would disrupt their operations across the region. The U.K.’s investment banking sector in particular will be required to move certain sectors of its business, which, given its size in the U.K. economy, could see a large number of jobs and capital leave the U.K.
Ireland may be one of the beneficiaries, with predictions of 4.8 percent GDP growth this year. Ireland topped the agenda at the last round of Brexit negotiations in July when both sides agreed that they want the Common Travel Area to be maintained. The issues involving Ireland, however, are complex and pose unique concerns for Ireland’s immigration, borders and trade, as examined in a BAL white paper released last week. The U.K. is scheduled to set out its proposal for avoiding an EU/U.K. land border between Ireland and Northern Ireland this week.
Migration Advisory Committee Call for Evidence
The MAC has put out a call for evidence from immigration stakeholders, including businesses that rely on EU/EEA migrants in their labor force. The committee has asked a wide-ranging series of questions based on three categories:
The responses will help inform the MAC’s final report and advice to the U.K. government on the impact of EU/EEA workers on the U.K.’s economy and how the U.K.’s immigration system post-Brexit should be aligned with a modern industrial strategy. A full list of questions and how to provide responses is available here. BAL will be providing clients with additional analysis and guidance in coming days.
Brexit and Ireland
The EU and U.K. have agreed to prioritize Ireland in Brexit negotiations and, following a meeting in July, stated their mutual intention to maintain the Common Travel Agreement and avoid a hard border between Ireland and Northern Ireland. The CTA provides British and Irish citizens special rights to travel without document checks and rights to reside without needing to apply for a residency permit. While the consensus on the CTA is positive news, the historical ties and geographic realities between the U.K. and Ireland present complex issues that are not likely to be resolved quickly or easily. To read further analysis, view BAL’s full white paper, “Brexit: What’s at Stake for Ireland” here.
Business
Temporary customs union?
The U.K. government is proposing a temporary interim customs union that would provide a transition period after the U.K. leaves the EU. The proposal would allow the U.K. to benefit from a customs union while attempting to negotiate bilateral trade deals with individual countries before the end of the interim period – a term that is unlikely to be accepted by EU negotiators. The arrangement would either be a streamlined customs union managed by Britain or a new customs arrangement with the EU that would not require a customs border.
Brexit’s impact on banking
The U.K. could lose more than 40,000 investment banking jobs to the EU if a hard Brexit forces banks to establish new units to continue operating across Europe. The funding of new EU operations is estimated to cost $30 billion to $50 billion, according to a report by consulting firm Oliver Wyman. Smaller firms may leave Europe altogether. Brexit threatens to remove the U.K. from EU law that allows banks in the U.K. to operate branches in Europe and European banks to operate in the U.K. without separate capitalization.
EasyJet headed to Austria
Among the companies moving their headquarters from the U.K., homegrown airline EasyJet has applied for an operating certificate in Austria. The certificate will allow the company to set up headquarters in Vienna and continue flights within Europe in the event that there is no deal on aviation by Brexit day in March 2019. Unlike trade, there are no default aviation rules that would kick in should the U.K. and EU fail to reach a deal about airline flights. According to EasyJet, the company already has staff in mainland Europe and would not need to transfer U.K. jobs.
NHS join other employers in voicing staffing fears
Brexiters campaigned that leaving the EU would revitalize the National Health System, but the NHS’s reliance on nurses from the EU has led the Royal College of Nursing to call for more certainty about their status, as well as that of new recruits post-Brexit. Nurses trained in the EU have already begun leaving the U.K. and applications have dropped 96 percent since the Brexit vote. To read an analysis of the U.K.’s current proposals concerning the free movement of people, click here.
Companies concerned about how changes in their industries due to Brexit will impact their high-skilled workers may wish to contact their BAL professional to explore all options.
BAL also strongly encourages companies to provide their opinions and feedback to the U.K. government and engage in the policy debate over EU/EEA immigration by responding to the MAC’s Call for Evidence either directly or in coordination with BAL.
Earlier this year, BAL conducted a benchmarking survey that provided valuable insights into how U.K.- and EU-based companies have been impacted by Brexit and how employers in different industries have begun to plan for their high-skilled EU/EEA workforces. Employers seeking guidance on how to respond to the Call for Evidence or for information on BAL’s advocacy efforts to the MAC should contact BAL.
IMPACT – HIGH
Home Secretary Amber Rudd has asked the Migration Advisory Committee to work with stakeholders to research and produce a report on the impact of Brexit on the U.K. labor market and to give its recommendations on how a future U.K. immigration system should be designed to best align with larger economic strategies.
The Home Office also issued a statement emphasizing that today’s commission does not affect EU and EEA citizens already living in the U.K. and confirmed that “EU citizens do not need to apply for documentation confirming their status now.”
In her letter to the MAC, Rudd also confirmed that the U.K. government will end free movement of EU/EEA nationals on Brexit day (in March of 2019) and reiterated the U.K.’s June 26 offer to the EU on the status of EU/EEA citizens’ rights – a phased approach that would set an eligibility cutoff date and a post-Brexit transition period before requiring EU/EEA nationals to apply for settled status. The rights of EU citizens living in the U.K. and vice versa were a key point in Brexit negotiations last week and the parties jointly issued a chart comparing where they each stand on the issue.
The Home Office is seeking the MAC’s advice on a future immigration system after Brexit that will cover the migration of EU citizens.
The chair of the MAC, Professor Alan Manning, responded that the committee will put out a call for evidence from immigration stakeholders shortly to gather their input. A suggested deadline for the report has been set for September 2018, though there are concerns that this would not leave a sufficient amount of time before formal Brexit.
The MAC has been asked to provide advice and evidence on the following issues:
Background: The Migration Advisory Committee is an independent group of economic experts that periodically is commissioned to provide advice on government policy. The committee is expected to put out a call for evidence to immigration stakeholders shortly, take evidence, provide interim reports, and produce a final report and conclusions by September 2018.
BAL Analysis: The commissioning of the MAC and forthcoming call for evidence are welcome developments. BAL will be engaging with businesses and individuals on each of the above issues, and expects to submit a package of responses and recommendations to the MAC that highlights business concerns and needs.
What is the change? The Home Office has published a statement of immigration changes that will require its officers in certain cases to consider alternative sources of income or financial support in determining whether a U.K. citizen or settled person meets the £18,600 minimum income for purposes of sponsoring a non-EEA family member. If successful, the non-EEA family member will be granted entry on a 10-year track to settled status (instead of five years), with the potential to apply for the five-year route if they subsequently meet the minimum income requirements.
What does the change mean? The change does not affect Tier 2 workers or points-based migrants or European nationals and their family members; however, the new policy will benefit some family unification cases for U.K. citizens and residents who do not otherwise meet the income threshold.
Background: The policy change comes in response to a Supreme Court ruling in MM (Lebanon) & Others in February that upheld the minimum-income requirement but also demanded that the Home Office allow more flexible proof of alternative sources of income to address the harsh results of applying an absolute income threshold.
The new rules only apply in “specified circumstances,” namely:
If the two conditions are met, the Home Office will consider the following forms of alternative funding sources:
Applicants must present verifiable documentary proof of the alternative sources. Home Office decision-makers will make assessments on a case-by-case basis and must consider certain factors in determining whether the alternative sources are genuine, credible and reliable.
BAL Analysis: The change does not affect Tier 2 workers or points-based migrants or European nationals and their family members, but helps to relieve a harsh rule that affects some low-earning British citizens and permanent residents.
The U.K. government released its proposed offer on EU citizens’ rights last week. While the proposal on EU citizens’ rights does nothing to immediately change the status of EU nationals currently living and working in the U.K., it does offer insight into the type of immigration regime and requirements the U.K. government is contemplating for EU nationals. In light of the new proposal, BAL anticipates a simpler process for EU nationals to apply for permanent residence as well as several other changes.
To better understand the changes that EEA nationals can expect from the recent proposal and which issues will require further negotiation, please read BAL’s full Brexit Bulletin here.
The U.K. government released its proposed offer on EU citizens’ rights last week. Given the lukewarm response by the EU’s Brexit negotiator, the talks have a long way to go to bridge the differences between the two sides. Splits are also appearing within Prime Minister Theresa May’s cabinet over whether a hard or soft Brexit is the best approach to preserve continuity for U.K. businesses.
While the proposal on EU citizens’ rights does nothing to immediately change the status of EEA nationals currently living and working in the U.K., it does offer insight into the type of immigration regime and requirements the U.K. government is contemplating for EEA nationals, and provides some clues as to how employers and EEA employees may begin planning for an eventual deal on citizens’ rights.
BAL anticipates the following changes:
BAL recommends:
Where the UK and EU stand on citizens’ rights
The U.K.’s proposal, released June 26, confirms that the government seeks to end free movement rights of EU nationals post-Brexit. After Brexit day, EU nationals would be required to apply for an immigration status.
The proposal indicates that the U.K. and EU remain deeply divided on several key issues involving citizens’ rights. Below is a summary of where the parties currently stand on citizens’ rights.
Responses to UK’s offer
The responses to the U.K.’s offer signal that many of the proposals are unlikely to be accepted by the EU. The EU’s Brexit negotiator Michel Barnier said on Twitter that “more ambition, clarity and guarantees [are] needed.” Labour Party leader Jeremy Corbyn called the proposal “too little, too late.” And the3million organization representing EU nationals in the U.K. said the proposal “has done very little to lift anxiety among those most affected.”
Hard v. Soft Brexit
Inside Theresa May’s cabinet, divisions are emerging over her hardline Brexit approach. Brexit Secretary David Davis advocates a hard break from free movement, from the single market and customs union, and from the jurisdiction of European courts. Chancellor Philip Hammond, concerned about business disruption and hitting companies with sudden tariffs and staff shortages, is pushing for a softer Brexit, with a longer transition period (up to four years) during which single market and customs union membership would continue.
Preparing your Company
BAL views the U.K. proposal as setting a baseline for further negotiations, and the goalpost will continue to shift as Brexit talks ensue and the EU makes a counter-offer. The U.K.’s offer falls far short of the EU’s stated positions on citizens’ rights, and, as a result, an eventual deal could look far different from the proposal. Nevertheless, the U.K. proposal contains some key elements that suggest how employers and EEA nationals may approach Brexit planning at this time. Employers are not encouraged to pursue residency applications for EEA nationals under the current system, and should take a wait-and-see approach as the government proposes to roll out a streamlined application process. However, BAL recommends that companies continue to track current EEA national employees and assess the timing and EU-makeup of their talent acquisition plans.
The Brexit Bulletin has been provided by the BAL Global Practice group in the United Kingdom. For additional information, please contact uk@bal.com.
Today, the U.K. government published details of its proposal on how it will treat EU citizens in the U.K. in light of Brexit proceedings, including proposals on how EU citizens would apply to remain in the U.K. following formal withdrawal. The proposal, titled “Safeguarding the Position of EU Citizens Living in the UK and UK Nationals Living in the EU,” is the first written offer from the U.K. government addressing the contentious issue of the status of EU citizens.
BAL reads the policy set forth by Theresa May and the Home Office as a minimum baseline of rights for EU nationals after Brexit and expects the EU to push significantly for greater rights during negotiations. EU Brexit negotiator Michel Barnier responded to the proposal stating that the EU’s goal on citizens’ rights is to maintain “the same level of protection as in EU law” and to guarantee those rights, “more ambition, clarity and guarantees [are] needed than in today’s UK position.” Therefore, BAL anticipates additional negotiating and additional shifts before EU nationals have full clarity on their future status in the U.K.
Key points:
BAL anticipates that given the U.K.’s proposal, the following areas will be likely areas of change and a focus for EU negotiators:
BAL Analysis: The U.K. offer is merely a proposal at this point and is likely to change as the EU negotiates its position. The proposal indicates that EU nationals in the U.K. would need to re-apply for their residency status either under a new voluntary system pre-Brexit or as a legal requirement post-Brexit; as such, they may wish to discuss with a BAL professional whether to undertake the laborious application process at this time.
Days after Brexit negotiations opened, U.K. Prime Minister Theresa May has made an offer to EU leaders on the issue of EU citizens’ rights – an issue that is a priority for both sides and affects 3 million EU citizens in the U.K. and 1.5 million Britons living in the EU.
The offer would create a new “settled status” for EU citizens who have lived in the U.K. for five years to remain permanently and enjoy equal rights to U.K. citizens. A cutoff date would be set, after which EU nationals would no longer be automatically eligible for settled status.
May rejected the EU’s position that the cutoff date should be Brexit day (estimated March 29, 2019), and instead indicated that the cutoff date would be negotiated and should fall sometime between the date the U.K. triggered Article 50 (March 29, 2017) and Brexit day. EU citizens who arrive before the cutoff date will be given a grace period to reach the five-year residency prerequisite. And those arriving after the cutoff date but before Brexit day will be allowed approximately two years to obtain a work permit or leave the U.K.
The prime minister made the overture while speaking after a dinner at the EU leaders summit in Brussels, calling it a “fair and serious offer.” The deal would require the EU to reciprocate by giving the same rights to U.K. citizens living in the EU. May also said that she did not want to see families split up, indicating that family members could be included in the offer.
The EU’s negotiating position is that all EU citizens who have lived in the U.K. while it was an EU member, and current and future family members, should enjoy a continued right to settle after the U.K. leaves the bloc.
In her speech in Brussels, May also rejected the EU’s stance that the rights of EU nationals should continue to fall under the jurisdiction of the European Court of Justice, indicating that U.K. courts would hear cases of EU nationals under U.K. law. May’s hard Brexit plan would remove the U.K. from the jurisdiction of the European Court of Justice.
BAL Analysis: May said that the offer was intended to provide “as much certainty as possible” to EU citizens in the U.K., but the parties remain divided on several key issues regarding citizens’ rights and, without a known cutoff date, EU citizens in the U.K. remain uncertain about their rights to remain.
Brexit negotiations are set to begin Monday between U.K.’s Brexit Secretary David Davis and the EU’s Brexit negotiator Michel Barnier while a political cloud hangs over Prime Minister Theresa May in the U.K.
The meeting will set out the structure of talks to follow in months to come, and will focus on the rights of EU nationals in the U.K. and vice versa, the financial settlement and other issues related to the divorce. The EU’s position is that the separation agreement must be resolved before future trade relations can be discussed. According to the BBC, EU officials have said that the U.K. has agreed to this approach, but Davis is not budging on wanting divorce and trade talks to occur simultaneously.
An early resolution on citizens’ rights would provide certainty to the more than 3 million EU citizens currently living and working in the U.K. and more than 1 million Britons living in the EU.
At home, May’s political future is uncertain. Following a shocking election defeat, she is in negotiations to form a fragile government with Northern Ireland’s Democratic Unionist Party. Blamed for running a lackluster campaign that failed to connect with ordinary voters, May now faces criticism for not meeting with victims of an apartment building fire in West London that killed more than a dozen residents last week, and her budget cuts are being scrutinized as a possible contributor to unsafe conditions leading to the fire.
Meanwhile, Conservative MP Brandon Lewis has been appointed Minister of State for Immigration for the new U.K. government. Having originally opposed Brexit, he is now a supporter of May and voted against unilaterally guaranteeing the rights of EU citizens to remain in the U.K. He reiterated that May has vowed to reduce net migration to the tens of thousands but has refused to say whether he agrees with the pledge, according to British media.
BAL Analysis: While the U.K. government’s priorities will become clearer by the end of June when the Queen’s Speech lays out the new government’s priorities, the Conservatives’ minority government is expected have a weakened hand in negotiations. It is hoped that an early decision will be made on the rights of EU nationals already living in the U.K. or arriving ahead of Brexit, to give much needed certainty to individuals and employers alike.