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An overview of Brexit for UK contractors

An overview of Brexit for UK contractors

The effects of Brexit on UK business is one of the key areas of debate, but the impact of changing employment laws, immigration rules and Britain’s single market status will have particular significance for contractors, who are always more exposed to market fluctuations. Here at Contracting Scout, we consider the long and short-term implications of Brexit for the UK contracting sector.

The short-term implications of Brexit for contractors
In the short term, the uncertainty around Brexit is likely to work in the contractor’s favour. Contractors provide the UK’s workforce with valuable flexibility, allowing businesses to rapidly up-skill their workforce or scale it down according to demand. This agility has been credited as one of the forces to drive the UK out of the last recession, with independents contributing around £271 billion to the UK economy in 2017. As businesses wait to see what the implications of Brexit will be, they may hold off on committing to new projects and hiring permanent staff. In the meantime, new projects and system changes still need to go ahead, which is where the flexible and cost effective services of contractors come into play.

At the moment, employers don’t know what Brexit really means, so businesses don’t know if they’re going to be in the single market or not. It’s also not known what deals will be made between the UK and Europe and how that will impact tariffs on goods and services. Although some UK contractors may experience difficulties, those with expertise in professional services sectors such as legal, IT and finance will find a demand for their skills.

The long-term implications of Brexit for contractors
Although business will continue in the short term, long-term uncertainty could mean a delay when it comes to businesses investing in large-scale projects and investments. This could affect hiring decisions; from eliminating some contractor positions to restricting the amount of time contractors can work before permanent employees must replace them.

There’s also the possibility that businesses will choose to move out of the UK in order to avoid possible tariffs or employment restrictions. Around 45,000 UK contractors live and pay taxes in Britain but work in mainland Europe; others work on short-term contracts or commute. If the UK leaves the single market, this will end the UK’s access to the free movement of goods, capital, services and labour that exists between EU countries. British Nationals will almost certainly need to obtain a visa before they can work in any EU country, which can be a time-consuming and costly process.

The restrictions on UK contractors working in the EU would mean that these contacts were more difficult to source in countries such as France and Germany, as it will be easier for clients on the continent to hire from other EU countries. In the long term, this could result in an excess supply of contractors in the UK, increasing competition and lowering rates. However, the flip side is that it would be more difficult for EU contractors to work in the UK, which could create a skills gap and drive up the charge-out rates of UK contractors.

In the case of a ‘No Deal Brexit’ there’s a strong possibility of a recession. This could have a major impact on the contracting sector. In the event that businesses have to downscale their workforce or cancel projects in order to sustain an economic downturn, contractors represent extra expense that can be dispensed with. Their independent employment status allows companies to terminate contracts with contractors at short notice and without compensation or legal consequence.

If the UK exits the EU the real implication of any deal will not be fully understood for many years as Britain seeks to establish itself in a post-Brexit world. With healthy increase rates for contractors this year, it seems likely that whatever highs and lows lie ahead for this resilient sector, there will always be opportunities for contractors who maintain and develop in-demand skills.

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