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Brexit Update - what have we learnt?

November 2016

“And let me be absolutely clear: existing workers’ legal rights will continue to be guaranteed in law – and they will continue to be guaranteed as long as I am Prime Minister” (Theresa May, 2 October 2016)

 

As Brexit continues to rumble on and dominate politics and headlines across the country, the shape and effect that Brexit will have on UK businesses is beginning to emerge. The largely meaningless phrase “Brexit means Brexit” that so many government ministers have relied upon until recently has begun to fade. It is being replaced with tentative, for the moment, suggestions of what the United Kingdom might look like outside the European Union.

Our most recent insights come from the Conservative Party conference in Birmingham, in which we saw the announcement of Theresa May’s ‘Great Repeal Bill’.  This legislation is mainly aimed at smoothing the transition from the EU. The ‘Bill’, if passed by Parliament, aims to take all EU law currently influencing British law and enshrine it into British law by way of an Act of Parliament. It will overturn the European Communities Act 1972 (UK) that gave supremacy to EU law over British law. This means that Parliament will be able to abolish, partially dismantle, or maintain these EU laws as they see fit following the UK leaving Europe.

Britain leaving Europe will also mean that the European Court of Justice’s case law will no longer have to be adhered to by British courts. This leaves open an opportunity for controversial judgements to be re-examined, in particular that of holiday pay. Only recently, 7 October 2016, the Court of Appeal handed down its decision on Lock v British Gas (see page 7 for details). The decision concurred with that of the Employment Appeals Tribunal, effectively saying that commission should be taken into account when calculating holiday pay. This is a result of the courts interpreting the Working Time Regulations in a way that is consistent with EU law.

However, as the quote from Theresa May at the start of the article indicates, existing worker rights, probably including holiday pay, will almost certainly be maintained after Brexit. Even if the government did decide to dismantle or change some parts of employment legislation it would most likely take years after Britain has left for them to pick apart all the intricacies of the EU laws. This all suggests that changes post-Brexit to UK worker’s rights will be very limited in the short-term.

One aspect of employment law that will almost certainly change though is that around immigration and the rights of foreign workers in the UK. A key facet of the leave campaign was the desire to gain control over the number of migrants entering Britain, and regaining control of British borders. Once again it was at the recent Conservative Party Conference that we saw this government’s view on what this might entail for businesses. Amber Rudd, the Home Secretary, announced a plan to have all businesses list their foreign workers, in her address to the Party. The immediate backlash she and the government faced by business leaders has led to the policy being shelved almost immediately. But it does highlight the policy ideas that Brexiters in government are leaning towards; control over our borders is being seen as non-negotiable. This was only further reinforced by Theresa May’s statement that “We are not leaving the European Union only to give up control of immigration again.” The immigration system seems set to be overhauled but there is little indication what those changes might look like.

These recent suggestions that Brexit will give preference in negotiations towards control over our borders rather than the single market, has seen the value of the pound tumble. This has seen many winners and losers in UK business. It has seen the FTSE 100 index climbing steadily as many of these companies do business overseas, so their profits when converted into pounds are now worth more. However, businesses that are limited to the UK and import from overseas have seen costs begin to rise. The most recent and public evidence of this was the dispute between Unilever and Tesco. Tesco refused to buy any more Unilever products, including Marmite and Ben and Jerry’s ice cream, when Unilever tried to raise their prices ten percent to make up for the loss in profits due to the falling pound. This is indicative of what we’re likely to see over coming months: rising costs will lead to raised prices that will eventually be passed on to the consumer.

This fall in the value of the pound has also seen the Resolution Foundation change their forecast of the expected change to the National Living Wage next year. They have downgraded the likely rise to 30 pence instead of 40 pence per hour, on top of the current £7.20 an hour. A recent study by insolvency firm Begbies Traynor has indicated nearly 100,000 businesses are experiencing financial trouble since the higher wage was introduced. So this slow down on the pace of increase might help businesses that have struggled to meet the higher costs that the living wage has forced on them. However, it is still a 30 pence rise on top of an amount that businesses are already struggling to meet. This is likely to mean even more of the backdoor measures that many businesses have taken to keep a lid on rising staff costs since the National Living Wage came in.

The best guess at the moment therefore is that Brexit will have a marginal effect on British workers’ rights. However, the effect on workers seeking employment here is likely to be significant.

 

Emma Loveday-Hill

Associate

e elovedayhill@prettys.co.uk

t 01473 298266 /01245 295267

 

 

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