How will Brexit impact the job market? 3 trends to watch
John Herlihy, Vice President and Managing Director, EMEA, LinkedIn
For now, the sky doesn’t appear to be falling in. In the last week Brexit has thrown global stock exchanges into turmoil, caused dramatic fluctuations in currencies, and is beginning to have real impact on businesses. Last week Richard Branson estimated that the Virgin Group’s value may have dropped by as much as a third, and indicated it was already changing its stance on potential business deals.
While policy-makers and senior business leaders will closely follow the movement of markets and the value of Sterling versus the Dollar or Euro, it’s the potential impact on businesses and their propensity to hire that will perhaps be most readily and broadly felt by everyone.
At time of writing, the signs are pointing to stabilisation in the markets as investors adapt to the news, indicating that the most drastic predictions may not materialise, at least for now. Whatever the future holds, the European environment in which professionals look for jobs and companies hire has permanently and utterly changed. There are three key trends that we should be watching to help guide us on what the longer term impact might be, and simple questions that employers should be asking themselves to prepare for the coming months and years.
3 Trends to watch out for
1. SMEs as a leading indicator
SMEs form the backbone of the UK economy, making up 99% of businesses and 60% of private sector jobs. In times of uncertainty when banks reduce or pull back from lending, small businesses can be most easily hit and — without large coffers to turn to — their expansion and hiring is restricted. This was one of the major negative impacts of the financial crisis.
Today’s environment is very different. UK banks today have 10 times the capital reserves they held in 2008 so they can keep lending to individuals and small businesses when times get tough, and at the same time alternative finance has become a larger player in the market. Right now, banks appear to be in no rush to change their product offerings until the outcome of negotiations with the EU is clear. There is every reason for optimism, but any change in the availability of small business finance could be an early sign of what lies ahead.
2. Fluctuations in the candidate marketplace
Like all markets, the talent marketplace relies on liquidity between multiple players, in this case talent and opportunities. Post-Brexit, there are two key dynamics that may emerge:
First, professionals stay put, nervous of change. When risk increases in one part of our lives, our natural reaction is to seek to reduce it elsewhere. We may see a reduction in the number of professionals looking for new jobs, delaying career changes in exchange for the certainty of sticking with the job they already have. As a result, companies reliant on job boards — people who are actively seeking new roles — may see their talent pool shrink. This puts the emphasis on building a strong employer brand, which can tempt the “passive” candidates that make up the majority of the workforce.
Second, professionals move quickly to beat the rush. Top talent knows it has options and may look to make an international career move soon, preempting any permanent changes that might make it harder to relocate later. Likewise, international talent living and working in the UK may feel less welcome in the coming months, and choose to return to more familiar environs. In this scenario, companies are in danger of losing much-prized talent. Now could be a time to have conversations with star players to make sure they feel comfortable and valued.
Over the next few months make sure to step up your employee engagement so you can see how these dynamics are impacting your team.
3. Increased competition from other markets
According to LinkedIn data, the UK is already a net exporter of talent when it comes to international migration, and the UK outside of the EU will be subject to a very different set of competitive forces. Last week we released new LinkedIn data as part of the World Economic Forum Human Capital Report that placed Australia, Chile, and the UAE as the global winners of tech talent. Already there are reports of start-up hubs in Germany courting UK tech firms.
For UK professionals with international ambitions, the EU has always been a natural destination given the ease with which they can relocate. Post-Brexit, the barrier to moving could increase significantly, making it just as tricky to move to France as it is to the US. This could be a boon to international business hubs which previously struggled to attract UK talent. Wall Street could, for example, suddenly have access to a wider pool of talent from the City of London. As the reality of the Post-Brexit playing field becomes clear, UK employers should prepare themselves to shout louder to attract talent, and work harder to retain it.
Here are some key questions for business leaders
Do you know where your talent comes from?
When we ask customers of our Talent Solutions business where they make most of their hires from, they typically list off a handful of organisations or countries. They’re almost always surprised, however, when we show them the data indicating that they hire from a far broader pool of talent than expected. Business leaders should have a good handle on the true range of sectors and countries that provide them with talent so they can prepare and adapt plans as they need.
How well known is your talent brand internationally?
If the UK parliament ratifies withdrawal from the EU, it could become trickier to move talent between countries, and competition for the top skilled professionals may increase as companies are forced to choose fewer people to relocate. Applying some insights from the question above will help business leaders ensure they’re best placed to compete for talent in the future.
If you need to move operations outside the UK, where will you go?
For organisations that do a lot of business internationally, more costly and complex access to talent has raised the question of relocating operations outside of the UK.
A growing trend among large employers with operations in different markets is something called “talent mapping”. Previously, companies looking for the best locations would spend large amounts of time and money commissioning analyst reports on the regions with the best combination of transport, skills and proximity to customers, for example. Today, the availability of real-time data on skills and talent flows means employers and the recruiters they work with can quickly see where the right talent is with a few clicks.
Whatever your stance on the debate, the EU referendum will have implications for the future flow of talent, which will affect businesses and the individuals working for them. Now is the time for business leaders to Brexit-proof their organisations and ensure their employer brand is a magnet for talent from all over the world.
Originally published at www.weforum.org.