The Brexit deal – a post-Christmas take from the REC

Like most business voices, the REC welcomed the Brexit deal on Christmas Eve. While the “Canada-style” Free Trade Agreement (FTA) that has been concluded is neither as deep nor as widespread as many might have hoped back in 2016, there were two reasons to celebrate.

Firstly, that there is a deal at all is good news. By avoiding a breakdown, the parties will maintain the ability to work together through the changes January 1st will bring – rather then playing a blame game. Even though many of the changes we will experience – especially in services – would have happened with or without a deal, the core goal of keeping goods flowing and focussing on avoiding delays has to be welcome.

Secondly, this is a framework to build on. It is interesting to see Chancellor Rishi Sunak already talking about additional deals around financial services. We will need to learn as we go, building on the agreement to smooth trade in services – including recruitment – in particular. Services are 80% of the UK economy, and the deal is notably thin on what it has to say about them. There is a commitment to ongoing work to improve the services provisions included though. This is welcome – and needs to be the UK negotiating priority in the months and years to come.

What this means for our industry

For recruiters, the services text is a bit of a mixed bag. There is some good news on market access – the list of things that can be done without establishment in an EU member state is likely to be quite long, as the business visitor rules are reasonably permissive (subject to a stay of 90 days in any 180) and “A Party shall not require a service supplier of the other Party to establish or maintain an enterprise or to be resident in its territory as a condition for the cross-border supply of a service”. We had been worried that it would be all but impossible to trade in an EU Member State without an office in at least one of the EU27.

That said – the challenge to all of this will be in the application. Looking at the text, there are some circumstances where non-tariff barriers to trade may be permissible, and the drafters clearly seek to exclude cross-border placement of agency workers. There remain many issues here and the Prime Minister was incorrect to say that it promised no non-tariff barriers to trade.

In our initial response, this array of complexity and vagueness is what led the REC and many other organisations to focus on the need for a support framework for businesses. No agreement delivered this late in the day could give businesses the clarity they need quickly enough – that is not the fault of David Frost or Michel Barnier.

Even so, there are still only three full UK working days between the agreement being made and it entering into force. Mistakes will be made, and non-tariff barriers will rise, whether or not they ultimately prove to be supported by the agreement. A period of grace as businesses find their way through the new rules is essential.

Four further points are of note for recruiters:

1.      The section on data is, on balance, quite reassuring. It does not yet, however, contain the official confirmation that the EU sees the UK’s data protection regime as equivalent. My hope would be that this will be resolved – the text seems to anticipate it will be – but it is not time to stand down planning on data just yet.

2.      Likewise, the sections on payments across borders are also clear and reassuring. While there will be work to do to get cross-border billing right, I anticipate this will be an area which can normalise quickly.

3.      Perhaps the greatest single area where there has been no result of use yet is on the recognition of professional qualifications. This is a big problem – both for UK and EU staff working in other party, and for those seeking to supply cross-border. It needs urgent attention.

4.      Finally, a word on visas. For international firms where people work for multiple weeks per year in different EU states, remember that you will have to measure that time and manage it to either avoid reaching the 90 day limit, or to give yourself clarity on which work visas you need to apply for, and for which staff. This is especially the case because the provisions for intra-corporate transfers in the FTA – transferring your own staff to your business in the EU – do not go as far as we would have liked.  

Where does that leave us? Basically, the deal gives us some hope – but recruiters need to keep hold of planning on data, cross-border mobility and establishment for now. These are areas the agreement deals with, and which we hope will improve with time. Professional qualifications are more of an open question, and you will need to establish a process relevant to the sector you service. As this looks likely to be done on a profession-by-profession basis, there may be resolution for some (perhaps medical staff) before others.

As always, the REC will be doing everything it can to support you. Much of this week is taken up by discussions with bodies from other sectors and the Government about the deal and its implications.

Do let us have any big questions as they arise for you and your business.

Members can access all our advice on the REC Brexit hub on the website, and we will be hosting a Brexit Realities webinar on January 7th to discuss where we are as a sector, post-deal – and what our next steps are. You can sign up for this here.