Kingsley Napley LLP’s response in respect of the Migration Advisory Committee’s call for evidence: review of EU migration

October 2017

Executive summary

Kingsley Napley LLP (KN) is an internationally recognised law firm with a top ranked immigration team. We act for leading international businesses in a wide variety of sectors including financial services, law, media, biosciences, engineering, architecture, IT, professional services and digital and creative, as well as for a wide range of private clients including investors and entrepreneurs. Many of our corporate clients are household names who have a global presence.

We have previously submitted detailed responses to a number of MAC calls for evidence on Tier 2, Tier 1 (Entrepreneurs) and Tier 1 (Investors), including analysis of survey responses from our client base and commentary.

This time, once again, we undertook primary research through survey feedback and discussions with clients, contacts and other interested parties. We also hosted a Migration Advisory Committee (“MAC”) Roundtable event at our offices on 24 October 2017 where Stephen Earl was present, as well as a representative sample of our key clients and contacts.

The principal findings from our discussions, survey feedback and from our own extensive expertise, are as follows:

The overwhelming response from our clients and contacts was that EEA nationals bring very positive benefits to the UK and to business, particularly in terms of their broad skills encompassing language skills, flexibility and technical knowledge.

Clients have stated that if the UK government were to introduce measures to make it harder and more expensive to hire EEA migrants, this would act as a strong incentive to transfer business or specific business units to another European location.

Whilst the majority of EEA nationals employed by our clients would meet the highly skilled criteria, a number of important roles are performed by EEA nationals, which would be classified as medium skilled. There is a concern that if it becomes harder for our clients to recruit EEA migrants for medium skilled roles on a long-term basis, this would inevitably result in a skills shortage. At present, it is often not possible to find a ready supply of such skills amongst the British labour force and many commentators have cited an acute skills shortage in a number of sectors.

The shortage occupation list would almost certainly need to be expanded as, if the government proceeds with its plans to restrict low skilled EEA migration, this will lead to skills shortages in a wide range of sectors which are currently heavily reliant upon EEA migrants, for example construction, hospitality, agriculture and healthcare.

Any increased hiring costs associated with hiring EEA migrants post Brexit will be felt much more keenly by smaller and medium sized businesses, than by larger companies. Larger companies will already have the HR function and infrastructure in place to deal with any new regulatory regime for hiring EEA migrants. However, many smaller businesses, which have been able to rely on EEA migration to fill skills gaps with minimal cost, will not be able to absorb a substantial increase in costs to hire EEA migrants in the future.

Consideration needs to be given to the role of self-employed EEA nationals working in the UK economy. They are not represented in the labour market statistics. Employers have indicated that access to this pool is important in allowing businesses to flex their human capital capabilities on short term projects.

Response

EEA migration trends

1. Please provide evidence on the characteristics (eg types of jobs migrants perform; skill

levels, etc) of EEA migrants in your particular sector/local area/region. How do these

differ from UK workers? And from non-EEA workers?

In response to our survey and also in conversation with us, our clients have been clear that they hire based on qualification and experience and that EEA nationals are typically well qualified and experienced. They have commented that they struggle to find suitably skilled staff among UK workers. It has been the desire to hire suitably qualified persons which has driven employers to recruit EEA workers, often to fill otherwise serious gaps in the labour market. The flexibility of EEA workers, both in terms of a willingness to work on short term projects and to travel, has also been a key characteristic which clients have identified in their EEA hires. Our clients have also identified the benefits of diversity of thinking in encouraging innovation and the importance of reflecting and catering to global clients. EEA migrants’ language skills and specialist skills or overseas professional qualifications are particularly valuable for businesses which operate across the EU or have a European client base. Clients have been clear that, language skills aside, there is generally not a clear distinction in the characteristics of EEA migrants, rather that they hire the best available applicant and that this is often an EEA migrant. Through our work with our clients and in response to our survey, we know that EEA migrants fill roles at all skill levels. However, the majority of job types identified have been skilled and highly skilled. Examples of these job types have varied by industry but have included:

Administrative roles Managerial roles Client facing financial roles Qualified accountants IT professionals (particularly developers) Architects Interior designers Town planners Nurses Doctors Radiographers Pharmacists Auditors Corporate Finance executives Creative advertising roles Social Media Lawyers Compliance and risk management roles Sales roles Traders Project managers Analysts Management consultants Software Engineers Human Resource roles

They have also identified EEA employees working in lower skilled roles, including catering, hospitality and cleaning jobs. EEA migrants are recruited to perform the same roles as those carried out by UK workers, unless the role is linked to country specific knowledge. For example, roles encompassing UK specific financial regulation, law, HR or UK accounting standards will typically be performed by UK nationals only. Clients have stated that EEA migrants along with non-EEA migrants are job creators and

serve as facilitators for opening up markets, leading to new business generation. UK

corporates which provide services within the EU will often employ an EEA migrant from that

EU country as the EEA migrant’s cultural and technical knowledge is often beneficial in

maintaining and building client relationships in that EU region.

2. To what extent are EEA migrants seasonal; part-time; agency-workers; temporary; short-term assignments; intra-company transfers; self-employed? What information do you have on their skill levels? To what extent do these differ from UK workers and non-EEA workers?

Over 83% of those who responded to our survey stated that less than 5% of their workforce consists of EEA nationals working in freelance positions. While the percentage is small, the feedback suggests that the ability for UK employers to employ EEA nationals in this manner is clearly advantageous where the work is temporary in nature. For this reason, it makes commercial sense for employers to offer short term roles rather than creating permanent roles for this type of work. EEA nationals are regularly employed in part-time positions and the services of self-employed EEA nationals are often utilised to assist with short term projects. Clients have commented on the flexibility of EEA migrants and their willingness to accept fixed term contracts for project based work. The trend of EEA nationals being more willing to accept fixed term contracts is most likely linked to them having free movement rights. Their ability to work on a self-employed basis in the UK and not being required to seek permission to work whenever they change employers, allows them to fill short term, part time, freelance roles, which seem to be less popular with UK workers. As such, if EEA nationals no longer have this flexibility to freelance, they may not be as amenable to taking on short-term based work and they are more likely to seek certainty with applying for permanent roles. Similarly, clients have commented that short-term assignments are less popular with UK workers, however, their experience is that EEA nationals are more likely to apply for these roles. As such, if work restrictions are placed on EEA nationals post Brexit where the effect would mean EEA nationals are no longer able to accept freelance or short term work, UK employers would find there would be even less interest in the uptake of these roles, given the trend now is that the majority of job applications received for short-term, part-time or freelancer based roles are from EEA nationals.

“10-19% of our 500+ UK workforce comprise EEA nationals. Of these, 5-9% are freelancers performing IT roles - we are a FinTech company and developers are essential to our business model. We have contractors across our corporate functions as a flexible workforce and for short term projects…” (Financial services/Technical sector)

“EEA nationals make up 10-19% of our 250+ UK workforce. 10-19% of our EEA staff are freelancers - approximate split re: types of roles, based on 2017 figures so far: Creative/Copy – 60%; Production – 25%; Other (CS/PM/support roles) – 15%. Of these, we brought them in due to: No capacity - 40%; Perm cover for open roles - 40%; Skill set not available in-house - 20%. Particularly for the last two areas, freelancers are quite key to our business model in order to operate.” (Media/advertising)

These two quotes demonstrate that the flexibility of being able to hire EEA national freelancers at short notice, who bring specialist language or technical skills to the role, is important to businesses. Although some may not be classified as highly skilled positions, they are nonetheless rather crucial in these sectors.

Freelance or locum roles are also common within certain industries, such as the medical and pharmaceutical sector – some of these positions are highly skilled. NHS Trusts utilise services of self-employed medical professionals to enable those professionals to work in different locations and NHS Trusts. Some of these roles are currently filled by EEA nationals. Statistics already reveal that EEA nationals contribute significantly to NHS services in the UK. The existing flexibility for EEA nationals to work between different locations is crucial to the day to day operations of these NHS Trusts. There is concern that EEA nationals who work on a self-employed basis are not represented meaningfully in the data that is available. Self-employed EEA nationals working in the UK play an important part in the running of many businesses, even though the percentage which they represent in each business is relatively small. Start-up businesses for example are more likely to utilise services of self-employed persons so it is important to obtain more data on how many EEA nationals operate within this type of work so that appropriate immigration solutions are offered for EEA self-employed persons. HMRC records may help to provide data on this. Current Immigration Rules are very restrictive and offer no viable solutions for migrants working on a short term, part-time, freelance basis. For EEA nationals who currently occupy freelance based positions or who undertake short term assignments, without a visa category enabling them to continue working in a similar fashion, this could impact businesses negatively. As mentioned by a prominent media/advertising company in the UK “freelancers are quite key to our business models” and feedback from a FinTech company is that these short term contractor roles ‘are essential’ to their business model. Large corporates may find a workaround by creating permanent roles but small and medium sized businesses (particularly starts ups) are likely to be affected as they may not have sufficient finances to offer permanent positions. Small/medium sized businesses are a significant part of our economy, particularly to local communities, so it is important to consider the effect it would have on businesses where there is reliance on self-employed EEA nationals working within these businesses in the UK.

3. Are there any relevant sources of evidence, beyond the usual range of official statistics,

which would allow the MAC to get a more detailed view of the current patterns of EEA migration, especially over the last year?

Many clients have stated that since the referendum the uncertainty which has reigned has led EEA staff members to consider their position and look for other opportunities abroad.

This is certainly borne out by the official data figures which show larger numbers of EEA migrants returning overseas and fewer arriving. Some clients have reported that their recruitment teams are seeing a significant reduction in speculative applications from EEA migrants following the EU referendum decision in June 2016.

“It has however been noted by our recruitment team that there has been a significant reduction in EEA applicants speculatively applying for roles within our organisation following the EU referendum.” (Professional services)

We have received anecdotal reports of a slow-down in the London rental market and believe this may, in part, be due to a reduction in EEA migration. We are of the view that estate agents may be able to shed further light on the extent of this slow down and the reasons for this. 4. Have the patterns of EEA migration changed over time? What evidence do you have

showing your employment of EEA migrants since 2000? And after the Brexit referendum? Are these trends different for UK workers and non-EEA workers?

Most of our clients were unable to comment fully here because either their business is too new or their records do not go back as far as the year 2000. However, the perception is that there has been a steady growth in the recruitment of EEA migrants over the past few years. However, as stated above, some clients have experienced a reduction in their EEA workforce since the referendum result due to fewer applying for roles in their company. While the MAC have specifically not asked us for any recommendations on the design of a new post-Brexit immigration system, it is clear that any system which comes into being at the end of the transitional period ought to be designed to ensure that UK employers and businesses continue to have access to the EEA labour force. 5. Have you made any assessment of the impact of a possible reduction in the availability

of EEA migrants (whether occurring naturally or through policy) as part of your workforce? What impact would a reduction in EEA migration have on your sector/local area/region? How will your business/sector/area/region cope? Would the impacts be different if reductions in migration took place amongst non-EEA migrants? Have you made any contingency plans?

Unanimously, all of those who responded to our survey are concerned about the impact of reduced availability of EEA migrants for both highly skilled and medium skilled roles, stating that a reduction in availability would have a negative impact on their business. The key unifying trend in the responses to our survey was an indictment on the availability of suitably skilled staff. Employers have recruited EEA nationals to help fill the gaps they have identified in the UK workforce. They have noted that, ‘there is a lack of skilled individuals in general so we need to hire from as wide a pool of talent as possible’. Some have stated that where they have business units which are heavily reliant on EEA migrants, due to their language skills for example, these business units may have to be transferred to one of their European hubs if it becomes too burdensome to continue to hire EEA migrants in the UK on a long-term basis.

“We wish to be able to source our staff within the EEA without any restrictions. If there are restrictions in place in the UK, it makes the UK less competitive relative to other locations within the EEA where we have subsidiaries. Furthermore, EEA staff are now less willing to move to the UK due to Brexit and there is very considerable negative sentiment towards the UK which is bad for business.” (Financial services) “A significant percentage of our global income comes from servicing and working with global brands in a networked capacity. London has a large portion of hubs or HQs for these clients. As a result we rely heavily on cross border international talent and skillsets to service these core clients. Mobility forms a central pillar of our ability to effectively staff these international teams both incoming and outgoing.” (Media/advertising) “The workforce is very diverse and highly skilled, recruiting for roles can be very difficult and therefore having a larger recruitment pool across the EEA is key to enable hiring in specialised areas. Project work occurs across the EU countries (as well as globally) and having language skills in EU countries is key, and is often more easily obtained when recruiting EEA nationals.” (Professional services)

The UK is currently experiencing record low unemployment. This is reflected in the comments provided by our clients confirming that EEA workers have been employed to fill gaps in the market due to shortages in the UK workforce. Up skilling the resident workforce would help resolve the shortages in the long term, however, in the immediate future, employers would have to look for talent outside the UK and, naturally, some of these are likely to be EEA workers. Only 19% of respondents stated that they have made contingency plans, for example certain measures have been taken by our clients such as increasing their graduate recruitment intake. Over 71% confirmed they have made no contingency plans. Having no contingency plan is not necessarily an indication that employers are not concerned about the effect of Brexit on their EEA workforce but it is more likely to be the case that employers are unable to formalise any plans as there is still a lot of uncertainty about what future EU migration rules will look like. Feedback from clients suggests that they are concerned about the lack of clarity on the outlook of future EU migration. Plans can only be mapped if there are directions provided as to how employers can continue employing EEA migrants in the future.

Recruitment Practices, Training & Skills 6. Please provide evidence on the methods of recruitment used to employ EEA migrants.

Do these methods differ from those used to employ UK and non-EEA workers? What impact does this have on UK workers? Have these methods changed following the Brexit referendum?

Over 85% of respondents confirmed that they do no use different recruitment methods to hire staff depending on nationality. They hire the most suitable and most qualified, skilled individuals available for their open positions. Many clients have stated that as language skills are in short supply amongst UK workers, quite often clients will hire EEA migrants because of the additional language skills which they can bring to the role.

“Often roles require language skills or experience in certain industries and projects and there is a wider resource pool of candidates in the EU that fit these requirements rather than just searching within the UK.” (Professional services)

”We use the same methods to recruit EEA nationals, non- EEA nationals and UK workers, however, following Brexit, there is an increased awareness of risk when we employ EEA workers now, due to the uncertainty over how long they will be able to stay in the UK.” (Architecture)

7. Do recruitment practices differ by skill-type and occupation? For highly skilled roles, our clients will use the same recruitment practices for all nationalities in order to source the best person for the role. 8. What are the advantages and disadvantages of employing EEA workers? Have these

changed following the Brexit referendum result? EEA nationals bring skills which are not readily available in the UK, for example language and technical skills.

“In Digital marketing, there is a lack of skilled individuals in general, so we need to hire from as wide a pool of talent as possible. We also have positions within the business which require fluent/ native language speakers eg German, French etc and these individuals tend to be EEA nationals. Without these we would lose the business to either a competitor or to a different country, and therefore revenue for the company. This would in turn lead to an overall reduction in roles across the company, which may include UK nationals.” (Media/advertising)

“EEA nationals bring specialist architectural skills, knowledge of software and local knowledge for projects.” (Architecture)

“We need to have dual qualified and dual language lawyers to assist our clients.” (Legal)

“…EEA nationals have the skills and experience to carry out the jobs required…we hire the best people that apply for the jobs and we struggle to find the skills we require currently when we do have a wider pool to select from.” (IT/ Technology organisation)

“Great creative talent developing across Europe (and beyond), diversity and quality of education, different backgrounds, broader talent.” (Creative, Branding organisation)

“Project work occurs across the EU countries (as well as globally) and having language skills in EU countries is key and is often more easily obtained when recruiting EEA nationals. The EEA workforce is diverse and highly skilled. Recruiting for roles can be very difficult, having a larger recruitment pool across the EEA is key to enable hiring in specialised area.” (Professional services)

“The fact that EEA nationals have an automatic right to work in the UK provides us with a much wider talent pool for these in demand skills. It means that we can attract a diverse workforce far more quickly than if we were just limited to a UK national talent pool. Many of the roles we recruit for have a Europe, Middle East and Africa remit and we are able to mobilise these staff around our European hubs to help us grow... Ultimately, it makes us more competitive and if restricted it will have a negative impact on our skill base.” (IT/technology)

UK corporates which have a global presence and offer services within the EU region are more likely to hire EEA migrants to benefit from their cultural knowledge within that EU country. The EEA migrant is often key to help service and manage EU clients accordingly and having workers who are familiar with what is happening on the ground within that EU country often leads to generating more work for the business within the EU. 9. To what extent has EEA and non-EEA migration affected the skills and training of the UK

workers? All the evidence we have received from our clients suggests that they take skills training very seriously for all their UK employees and invest considerably in suitable training for all levels of staff. Clients state that they select candidates on the basis of the skills they can bring to the role. Where employers struggle to fill roles from the UK workforce they need to widen the net as far as possible and will recruit foreign migrants from both the EEA and non EEA countries, to plug the skills gaps.

“We have a full Learning and Development team focused on up-skilling everyone within the business. This includes face to face training, e-learning, external speakers and external training courses. We also run annual graduate and apprenticeship programmes to train up UK nationals.” (Media/advertising) “We have a Talent/Learning and Development programme in place for all of workforce, this is not separated by nationality.” (Financial services)

10. How involved are universities and training providers in ensuring that the UK workforce

has the skills needed to fill key roles/roles in high demand in your sector? Do you have plans to increase this involvement in the future?

Many clients have stated that universities are not providing local students with business-ready skills and there is an acute shortage of UK graduates with language and IT skills.

Most clients work with training providers to up-skill their UK workforce and it is likely that increasing budgets will be allocated to this.

“In some degrees there is too much focus on academia and not the behaviours needed to succeed in business today (motivation, resilience, curiosity) - recent research suggests that previous experience and academic qualifications do not translate to the best candidates for jobs. We need to look for the factors (outlined above), along with people who are agile when business changes ….” (Media/advertising) “Staff with relevant IT skills appear to be lacking in particular from the UK work force.” (Professional services)

“In financial services we might expect to recruit those with banking, mathematics, accounting and other business related degree qualifications. It is still surprising to us that we see people trying to enter this industry, having made a decision relating to higher education that has no bearing on this as a career choice.” (Financial services) “Language skills are very poor in UK nationals.” (Media/advertising)

“There are a number of skills lacking with UK graduates such as problem solving, thinking conceptually about challenges and drawing inspiration from different sources (not just Google!). There is also a lack of confidence in talking to people, presenting and even articulating their thinking.” (Creative branding)

“UK graduates are behind their Europe, Middle East and Africa counter-parts in terms of language and vocational skills. Graduates from France and Germany present stronger profiles due to the vocational experience in their courses. They undertake internships therefore their business engagement and experience when they graduate is strong.” (IT/technology)

11. How well aware are you of current UK migration policies for non-EEA migrants? If new

immigration policies restrict the numbers of low-skilled migrants who can come to work in the UK, which forms of migration into low-skilled work should be prioritised? For example, the current shortage occupation list applies to high skilled occupations; do you think this should be expanded to cover lower skill levels?

The shortage occupation list will certainly need to be expanded to cater for both medium skilled and low skilled occupations in sectors which to date have relied heavily on EEA migrants to fill roles, which have proved unpopular with UK nationals.

“…we are aware that many of our highly skilled EEA employees relocated to the UK with families, therefore if their husband / wife is not able to obtain work they may be less willing to relocate. Therefore spousal visas would be needed in the future (if visas were required for EEA nationals).” (Professional services)

“Our employees aren’t always qualified in linear ways and therefore placing restrictions on low skilled EEA migration would have a considerably negative impact upon our organisation.” (Creative branding)

“This has more of an indirect impact, but services we rely on for the running of the business, such as our cleaning company, suppliers, couriers and so on, would be more difficult to procure at competitive prices as they employ a majority of low skilled EEA workers. This would have an impact on our overheads and thus on the fees we charge, leading to an inflationary impact longer term.” (Architecture)

Economic, Social and Fiscal Impacts 12. What are the economic, social and fiscal costs and benefits of EEA migration to the UK

economy? What are the impacts of EEA migrants on the labour market, prices, public services, net fiscal impacts (e.g. taxes paid by migrants; benefits they receive), productivity, investment, innovation and general competitiveness of UK industry?

Direct economic impacts Our clients are unanimous in their view that EEA migration benefits the UK economy and that restricting it will make the UK less competitive:

“If there are restrictions in place in UK, it makes the UK less competitive relative to other locations within the EEA where we have subsidiaries. Furthermore, EEA staff are now less willing to move to the UK due to Brexit and there is very considerable negative sentiment towards the UK which is bad for business.” (Financial services)

Benefits to employers of EEA migration When asked about the benefits of EEA nationals to their own organisation, some clients were clear that that they could not operate at all without them. At the other end of the scale, some simply made the point that being able to recruit EEA nationals without restriction provided a wider talent pool than if they were restricted to the UK labour market. Our clients generally employ high-skilled, relatively highly-paid EEA nationals in specialist roles. The specific benefits mentioned by our clients include:

Filling other skills gaps – in particular in IT, science, engineering and architecture.

Diversity and creativity – contributing to diversity of cultures, ideas and experiences, leading to greater creativity.

Language skills and cultural knowledge – providing essential language skills and cultural knowledge needed for particular customers and projects.

Our clients will lose business to other countries if EEA migration is restricted Clients said that they would lose business to other countries if the benefits brought by EEA nationals were lost because of restrictions on EEA migration: If EEA migration is restricted this would result in:

“Employees having to leave the UK, resulting in loss of business/projects and the ability to take on any new international projects.” (Architecture)

“As a business we work across the EU and as such, we need language and cultural skills not found in UK nationals. We find that UK nationals do not tend to have the language skills required for our clients. We would therefore be at risk of losing the business. As nearly 20% of our employees are EEA nationals, we would have significant problems recruiting UK workers into these positions as there are not enough skilled UK nationals in the market.” (Media) “In advertising, creative campaigns need to have a global footprint, meaning understanding the nuances of different cultures is imperative to delivering quality work to our clients. We would see a decrease in diversity of thinking and innovation. With less diversity of thought and people, clients may take their business to other countries where employees are more representative of their business.” (Advertising) We ... have positions within the business which require fluent/ native language speakers eg German, French etc and these individuals tend to be EEA nationals for specific client needs. Without these, then we would lose the business to either a competitor or to a different country and therefore revenue for the company and therefore there would be an overall reduction in roles across the company, which may include UK nationals.” (Media)

Some clients reported that their business had already suffered because EEA nationals were harder to recruit and retain since the EU referendum:

“We have seen our EEA national population almost halve since the Brexit result, we have therefore lost important skills from the business.” (Professional services)

Introducing work visas for EEA nationals will damage competitiveness Clients were clear that requiring EEA nationals to obtain visas to work in the UK would damage their competitiveness because of delays and the administrative burden of sponsorship:

“If limits were introduced and a visa system implemented for example it could have a negative impact on staffing urgent jobs due to the length of time it would take to obtain the correct work authorisation, for example in our Technology Risk department.” (Professional services)

“Sponsoring migrants is already a lengthy, administrative and costly exercise. We would likely recruit fewer migrants, to the detriment of our business - New restrictions to the short term visa category have already stopped us from moving people to the UK for short-term business assignments. This has been detrimental for 2 reasons, 1) we can offer less opportunity for global mobility, which increases employee engagement and 2) where this has been intended to cover an open role, we have either overstretched current employees, or haven't been able to grow our client accounts, as we simply haven't had the resource to do the work – The current restrictions on Tier 2 visas i.e. the cooling off period, already create stress and anxiety for migrants.” (Media)

Restricting EEA migration will lead some of our clients to relocate from the UK Many of our clients, especially those in financial services, are setting up offices in other EEA countries because of the uncertainty around Brexit. This is largely because they want to keep passporting rights but EEA migration is also an important consideration. One client said that if restrictions on EEA migration were introduced by the UK they would move their business to the Netherlands, where they had already set up a subsidiary:

“If limits [on EEA migration] are imposed, we would simply relocate to the EEA where we would not be exposed to restrictions. We have set up a subsidiary in the Netherlands, to which we would transfer EEA business and staff.” (Financial services)

Indirect economic impacts of restricting EEA migration The MAC’s analysis must take account of the political context and acknowledge that a decision to restrict EEA migration will have unintended consequences, which in turn will have major impacts on the UK economy. Impact of restrictions on British migration to the EU If the UK imposes restrictions on EEA migration, the EU will reciprocate by imposing restrictions on British migration to the EU. The EFTA countries will do the same. UK companies, including our clients, frequently send UK-based staff to work on projects in the EEA. Our clients said that any restrictions on British citizens’ ability to work in the EEA will cause them serious problems:

“We have a substantial number of EU based clients as well as a parent undertaking in the EEA. Any restrictions on free movement outbound would be a substantial negative.” (Financial services)

“[We] are part of a global network and frequently work with member firms within Europe and will pitch for certain pieces of work together. This may therefore mean less work could be won within the network if we cannot share skills from other firms.” (Professional services)

One client was clear that if British citizens could not easily work in the EEA they would reduce their UK workforce:

“In the same way we bring EEA nationals to the UK to help with projects we send UK employees to the EEA to help with projects, it expands their knowledge and skill set and helps us meet our business and customer needs; if these were to be curtailed or restricted I would imagine we will build our workforce in mainland Europe and reduce our UK headcount, so this is likely to restrict our growth and success in the UK. Given we have European head office jobs here too, it would make it more difficult for those people to travel to Europe to support our business and would make sense for those functions to be relocated - resulting in UK redundancies.” (IT/Tech)

Impact of losing access to the European Single Market Retaining access to the Single Market is essential for our clients, particularly those in financial services:

“We rely on EU-market access in terms of MiFID in particular, and the government is unable to provide any clarity other than repeating "best possible deal" / "frictionless trade" and so forth; which is utterly useless in terms of having any clarity.” (Financial services)

The EU has made it clear that the UK cannot be part of the Single Market without accepting the EU’s four freedoms, including the free movement of labour and services. If the UK imposes restrictions on EEA migration and service provision, the EU will restrict the UK’s access to the Single Market. This will have a direct impact on the UK economy and the MAC must take this into account. Both we and our clients are concerned that in the discussion on the rights of EU migrants in the UK and UK Citizens in the EU and controlling the movement of EU labour, the debate is not focusing on service provision. Apart from financial passporting within the financial services industry, very little is being said about the impact of the loss of the right to provide services across EU borders after Brexit. The UK exported around £60 bn of services to the EU in 2015 and services account for 80% of the UK economy. UK businesses that send staff (both UK and non-UK) into the EU to provide short-term temporary services, particularly in the legal, IT, consulting and financial sectors, have serious concerns as to how the loss of these rights will affect their business and the continued mobility of their workforce. Each EU state has different rules on the permitted activities business travellers may undertake and when work permits are required for different types of activities. If the Schengen visa and entry rules were to be applied to UK staff working on short term projects in the EU, there would be significant administrative burdens, costs and delays should work permits be required. In addition, existing service provision rules also allow non-EU staff lawfully employed in the UK to be deployed to work as service providers into the EU without the need for a visa or work permit (the “Vander Elst”) rules. UK businesses will find themselves unable to pitch for major projects in the EU if they cannot guarantee the mobility of their UK workforce to work on these projects. Impact of damaged reputation of the UK in Europe: “closed for business” The UK’s decision to leave the EU and its stance in the withdrawal negotiations have not enhanced the reputation of the UK in the rest of Europe.

Joris Luyendijk’s recent article in Prospect magazine, How I learnt to loathe England1 describes a Dutch journalist’s disappointment with the country. (He focuses on England on the grounds that he has no experience of Wales, Scotland and Northern Ireland.) He describes a divided, hyper-competitive, inward-looking culture at odds with the open society he was expecting when he first moved to the UK. It is possible that similar views of the UK are becoming more widespread in continental Europe. One of our clients believed that restricting EEA migration would be particularly damaging to the UK’s image in Europe and that it would make EEA clients less willing to do business with the UK. He said that EEA clients already see the UK as “a more narrow-minded country lost in the glory of its past” and that significant restrictions on EEA migration would tell the world that the UK is “closed for business”:

“Besides the quantitative impact of restricting migration, one should not forget that there is also a psychological effect of EEA migration restriction. We have experienced that EEA nationals are less keen to move to the UK; and EEA clients less willing to do business with the UK, as they see the UK as a more narrow-minded country lost in the glory of its past. Any significant restrictions on EEA migration will compound this effect, and tell the world the UK is closed for business.” (Financial services)

Social impacts of restricting EEA migration Ending free movement is not the same as never having had it. If the UK restricts EEA migration after leaving the EU the social impacts will be felt more acutely than if the UK had never been part of the EU and if EEA nationals had never enjoyed free movement rights. It is disingenuous to claim that the prospect of not having free movement does not make the UK unusual, as stated in the MAC’s briefing note. The UK will not be in the same position as Canada. It will be closer to the position of California if California were to secede from the United States and restrict migration from and to the remaining states. The briefing note correctly refers to the fact that the UK had free movement arrangements with the Commonwealth countries until the Commonwealth Immigrants Act 1962. That legislation had a substantial human cost for Commonwealth citizens living in the UK as well as for people in other Commonwealth countries. Even now there are elderly Commonwealth citizens living in the UK whose immigration status is uncertain. We recently represented a Jamaican citizen who has lived in the UK for 60 years and was incorrectly told by the Home Office this year that she had no right to live in the UK and needed to leave immediately. Restricting EEA migration will cause similar problems for years to come. Impact on EEA nationals living in the UK It is well known that the EU referendum result and the uncertainty around citizens’ rights have caused anxiety to EEA nationals living in the UK and to British citizens living in the EU. Many of our individual clients have told us that the UK’s refusal to guarantee their right to stay in the UK together with its determination to end free movement (the two things are separate but linked) have made them feel that they are no longer welcome here. The highly

1 https://www.prospectmagazine.co.uk/magazine/how-i-learnt-to-loathe-england

publicised mistakes by the Home Office in sending letters threatening EEA nationals with removal have not helped. Restrictions on EEA migration are bound to cause more anxiety and practical problems for many EEA nationals living in the UK, despite the government’s promise of a straightforward registration scheme. The scale of the task makes it clear that the scheme will be anything but straightforward. Mistakes will be made. Families will be divided. And EEA nationals will feel less welcome, just as Commonwealth citizens did as a result of the 1960s legislation. The MAC’s briefing note accompanying the call for evidence says that the MAC’s remit is to make recommendations which maximise the “total welfare of the resident population”. Millions of EEA nationals living in the UK have acquired permanent residence, whether or not they have obtained a Home Office document certifying permanent residence. They are by definition part of the resident population so the MAC has to take into account their welfare when considering the social impacts of restrictions on future EEA migration. Impact on British citizens British citizens voted by a narrow majority to leave the EU. It may be that some of them – maybe most of them – were motivated by a desire to restrict EEA migration. However, if EEA migration is restricted this will have negative social impacts on British citizens as well as EEA nationals living in the UK. There will be a direct impact on British citizens living in the UK whose family members are EEA nationals, for the reasons given above. British citizens living elsewhere in the EEA who have non-British family members will also be directly affected. This is because EEA national family members of British citizens will not be able to rely on current EU free movement rights to move to the UK and non-EEA national family members will not be able to accompany the British citizen to the UK under the Surinder Singh principle. If these families cannot meet the requirements of Appendix FM of the Immigration Rules they will not be able to live together in the UK. This change may only affect a small number of people but it will be devastating for them and the MAC should take it into account, even if these people are not currently members of the resident population. Finally, as mentioned above, if EEA migration to the UK is restricted, British citizens will face similar restrictions on migrating to the EEA. Leaving aside the effect on the economy, this will have a direct negative impact on the lives of millions of British people who want the freedom to live, work and study in continental Europe. The low-skilled and the poor are the most likely to be affected because they are the least likely to be able to meet any new visa requirements. Their life chances will be diminished just as much as those of EEA nationals who will no longer be free to move to the UK. Fiscal impacts Free movement involves minimal bureaucracy. In the past, EEA nationals rarely applied to the Home Office for confirmation of their status unless they had a non-EEA family member. The sharp increase in EEA nationals applying for a Home Office document is a direct result of the EU referendum result and the uncertainty about the future status of EEA nationals in the UK.

If the UK requires EEA nationals to be sponsored under Tier 2 or to obtain other types of work visas in future this will lead to a vast increase in paperwork for employers and for the Home Office. The Home Office will therefore need more money. If the fees for EEA nationals are set at the same rate as for non-EEA nationals the fees will more than cover the additional cost to the Home Office, but doing this will have devastating consequences for the UK’s relationship with the EU and potentially for British citizens wishing to work in the EEA. In contrast, if the fees for EEA nationals are set at a much lower rate than for non-EEA nationals the Home Office will need to be given money from another source to cover the cost of processing the applications. This means that the Government will have to borrow more, raise taxes or cut spending in other areas.

13. Do these differ from the impact of non-EEA migrants? Many of our clients also employ non-EEA migrants but we did not explore this issue in depth. 14. Do these impacts differ at national, regional or local level? We have no evidence relating to this. Our clients are mostly based in London.

15. Do these impacts vary by sector and occupation? Our clients operate in all sectors but particularly in financial services, media, technology and architecture. There were no marked differences in their views by sector.

16. Do these impacts vary by skill level (high-skilled, medium-skilled, and low-skilled

workers)? We have no evidence relating to this. Our clients mainly employ EEA nationals in high-skilled roles.

Survey results

Approximately how many staff do you employ in the UK?

Which sector do you operate in?

Approximately what percentage of your UK workforce are EEA

nationals?

What is the skill level of the roles performed by your EEA nationals?

Approximately what percentage of your EEA staff are working as self-

employed contractors/freelancers or agency workers?

What impact would a reduction in the availability of EEA migration have

on your organisation on a scale of 1-10? (1 significantly negative - 10

significantly positive)

If there were only restrictions applied to low skilled EEA migration, how

significant would this be for your business on a scale of 1-10? (1

significantly negative - 10 significantly positive)

If additional limits on all migration into the UK were to be introduced, how significant would this be for your organisation on a scale of 1-10? (1 significantly negative - 10 significantly positive)

Has your organisation made any contingency plans to cover a possible reduction in the availability of EEA migrants?

Do you use different recruitment methods to employ EEA nationals than used to employ UK or non-EEA workers?

Have you changed your recruitment strategy following Brexit?

Does your organisation struggle to recruit suitably skilled UK workers?

Do you think that universities and training providers are doing enough to ensure UK workers have the skills needed to fill key roles in your organisation?

Do you make use of free movement outbound to your European offices for work assignments and/or for business meetings with clients?

Do you have a Sponsor Licence?

Contributors

The following respondents expressed their consent to being acknowledged within this report:

BDP

Starcom Worldwide Ltd

Symbiotics UK Limited

Kotak Mahindra (UK) Limited

EBL Miller Rosenfalck

The following sectors’ views have been captured in this report:

Financial services

Professional services

Advertising and creative

Architectural

IT

Legal

Contact details

Nicolas Rollason

Partner and Practice Area Leader, Immigration

Kingsley Napley LLP

14 St John’s Lane

London EC1M 4AJ

Email: nrollason@kingsleynapley.co.uk

Telephone: 020 7814 1276