Brexit and the implications on labour supply and exploitation

09 February 2021


With Brexit making way for the UK’s new immigration system, the implications that the changes may have on labour supply have been a hot topic – and worry – for many. New routes of entry such as the skilled worker route and frontier worker permits pose a high bar for those wanting to come and live or work in the UK. This is heightened by the amendment to IR35 legislation, which is likely to see a wholescale move away from engagement of personal service limited companies with a move back to a sole trader or employee engagement. The new curb on immigration to the UK alongside the pandemic means that temporary labour is likely to be seen as an attractive stop gap for employers who don’t want to risk permanent employment of workers.

The new rules mean that access to the UK, for workers who haven’t lived or worked here before, generally will now be restricted to only those who meet points-based system. This new system poses an extremely high bar, with the skilled worker route having the following tough requirements;

  • The job itself must be at a required skill level of Regulated Qualifications Framework (RQF)3 or above,
  • The applicant must speak the required standard of English,
  • They must be paid a salary of £25,600 or the going rate for the job, whichever is higher,
  • They must work for a UK employer that’s been approved by the Home Office,
  • The job must be on the list of eligible occupations,
  • And they must have a ‘certificate of sponsorship’ from their UK employer with information about the role they have been offered.

For industries whose workers will not meet the new thresholds, but often rely on non-domestic temporary labour, these new barriers will make it more difficult to source the workers they need by removing their access to foreign labour. In this sense, the pandemic, which has left thousands out of work, could lend a helping hand to these industries. However, it is likely that, whilst many have been left searching for work, this would entail lots of retraining and upskilling that may not be practical. Also, it may be necessary to increase pay rates to entice domestic workers into available roles which will contradict the trend where rates for temporary labour have decreased in recognition of the previous plentiful supply.  In addition to increasing pay to attract workers, employers can increase their appeal through non-financial benefits or by enhancing their brand. This would make them attractive as an employer in the longer term. Similarly, clear career development will help organisations both recruit and retain the people and skills they need, particularly in more specialist roles.

One of the main concerns is that these hurdles will mean major labour shortages leave huge gaps that companies cannot afford to leave empty. The worry is that this will lead to increases in illegitimate routes of entry and labour exploitation as criminals take advantage of those desperate to live and work in the UK.

The transition period eased these worries for a time and with everyone’s focus drawn to Covid-19 any concerns over the impact of Brexit were quietened. However, with the transition period over, the reality of the problem may soon come to light for many employers.

Further concerns about UK settlement:

As employers can only sponsor workers whose services they will use themselves, there is no scope for companies to use workers from abroad as temporary labour unless they have settled or pre-settled status in the UK or qualify for a Frontier Worker Permit. It is a major concern that the points-based system could lead to an irregular workforce and many migrants, who previously would have been able to seek work in the UK, may not qualify.

The points-based system is specifically targeted, meaning that it will not be applicable for many roles and therefore, the impact on industries such as construction, where lower skilled roles would not qualify, is huge. For example, it has been estimated that nearly 60% of EU employees in construction will not qualify for the skilled worker route.  Over half of the construction workforce in London is made up of migrant workers, 31% of which are EU born. This leads to significant concern for businesses about who will fill the gap. While the effects of the Covid-19 crisis have led to a large number of job losses, which could increase the accessible domestic supply of labour in the short term, in the longer term, firms will argue that the loss of the migrant labour source from the EU is a significant problem. 

Common trafficking areas + common traits in trafficking:

Generally, labour exploitation is common in industries such as construction due to demand for cheap labour. Many reports of labour exploitation begin in London with workers then transported around the country. Most effected are those with limited English-speaking skills, often those from Albanian or Romanian backgrounds. The traffickers will often be the same nationality as those that they exploit and the arrangements for travel to the UK and the offer of work are often made in the home country.  The traffickers’ knowledge of the individual’s family back home can be a threat which enables them to perpetuate the exploitation.

The exploited are often in debt to their traffickers for the cost of travel to the UK and accommodation once they are here which leaves them vulnerable and without realistic means of escape. These people are frequently given fake CSCS cards, are paid rates below minimum wage and are often controlled to such an extent that they are unsure when or how much they are getting paid. These are just some of the tactics used by traffickers in order to maintain control over those they are exploiting in order to generate as much economic gain as possible. Whilst many are hopeful that the new immigration rules will curb exploitation, it is possible that, with the usual routes of entry closing, illegal entry could become a lot more common.

What can be done? - GLAA and Government plans:

The GLAA addressed some of the above issues in a press release where they discussed some possible changes that could be put in place in order to help stop labour exploitation.

There are plans to create a GLAA national qualification on labour exploitation to get key messages to college level individuals. This could help to educate the future workforce in how to identify exploitation. However, this alone does not target exploitation at its root and with the effect of Brexit beginning to take shape it is clear that more needs to be done over the coming months and years in order to tackle exploitation. Some of the suggestions include the planned introduction of single enforcement body which would involve a merger of the GLAA with other bodies as a ‘one stop shop’ to ensure information is not missed. It is hoped that this could come in the next 2-3 years. Further licensing could be enforced for high risk areas such as car washes and possibly construction, which although it would cause practical issues for businesses, could be a major factor in reducing exploitation. Other suggestions have been made such as the introduction of mandatory human rights due diligence. This is coming into force in the EU with details being worked out at present. However, the introduction of this into UK law, given current circumstances, seems a long way off.

Employers – what to look out for when sourcing labour:

It is clear that businesses need to be more diligent when engaging with suppliers in order to gain comfort that all entities in the supply chain comply with and promote ethical standards in regard to their engagement of labour.  Notably, there is likely to be pressure on pay rates in supply chains in the short to medium term and the entity at the top of the supply chain needs to be conscious of the rate that they are paying and whether it is sufficient to enable ethical standards in the supply chain.  Measures such as the use of a code of conduct and due diligence, both on engagement and during the continuity of the supply, are critical in ensuring that standards are maintained.  Employers have a moral duty to be aware of who they have working for them and the welfare of those individuals and they need to have policy and procedure in place to be able to vouch for the standards that they set and maintain.

For those already settled in the UK, the application process for settled status doesn’t close until June 2021, after which, the new right to work process will come into operation. After this date, employers will need to be careful to check that those who they employ have right to work status, without demonstrating any discrimination.

It is a worrying time both for those who would previously have entered the UK for work and those who rely on non-domestic and temporary labour in their operations. Employers will need to have made the necessary preparations to ensure that they continue to have access to the labour skills their business needs. Compliance should be the focus more than ever in order to protect workers and ensure that reputation is maintained.