The digital economy, which is growing at twice the rate of the wider UK economy, now contributes around £170bn a year, according to Tech Nations third annual report published earlier this year. The tech industry has attracted talent from across the EU. ONS figures suggest approximately 180,000 EU nationals work in the sector, representing around 7% of the workforce. London has by far the highest concentration of the digital tech workforce, although hubs have emerged across the country in cities such as Manchester and Birmingham, as well as Cambridge, Bristol and Cardiff.
The government is still determining what the UK's immigration landscape will look like after Brexit, but we do know that that there will be an end to free movement as we know it, and with it the unfettered access to the EU workforce. Whilst there is talk of a transitional period to avoid a 'cliff edge scenario’, nothing has been formalised or mutually agreed. In the meantime EU nationals currently in the UK do have some options in order to secure their longer term UK immigration status, but uncertainty remains. For now, employers in the tech sector need to consider what Brexit means for their European population, what support they can provide their workforce, and how they will manage talent resourcing in the future.
What’s the potential immigration impact of Brexit for the UK’s technology sector?
Around 180,000 EU nationals are employed in the UK’s digital tech sector. Free movement under EU law means they are able to work in the UK on an employed, self-employed or contractor basis. This freedom has driven entrepreneurship, collaboration and enabled employers to secure skilled staff relatively easily. A ‘Hard Brexit’ through choice or ‘no deal’ would potentially result in a ‘cliff edge’ exit from the EU. In the absence of an agreement with regards the rights of EU nationals already in the UK (and British nationals in the EU), we may see the increased departure of those already here, which would amplify the situation.
The end of free movement as we know it will also likely result in established UK tech businesses finding it harder to recruit, and potentially more expensive too, as talent become scarcer still. Recent data from the Recruitment and Employment Confederation suggests there has already been a fall in the number of job applicants from the EU and this is likely to continue to fall over the coming months of uncertainty.
Businesses are going to need to put more thought into who they recruit and how, and if they haven’t already, they need to consider what support, if any, they will be providing to existing EU staff in order to safeguard their position in the UK.
What’s the UK government’s current position, and is the tech sector making any calls for ‘special treatment’?
In recent days the UK government has stepped up its efforts to progress Brexit talks onto future trade deals, the transition period and the post-Brexit relationship. The EU, however, has made it very clear that no other discussions can take place until it is clear what pre-Brexit financial commitments Britain is prepared to meet after it leaves. To add to Mrs May’s challenges, hardliners within the Conservative party continue to promote the toughest ‘no deal’ hard Brexit line.
From an immigration perspective there have been no specific concessions or carve outs for the Tech sector. As it stands, Tech Nation’s Tier 1 (Exceptional Talent) visas category would not be impacted by a Brexit – the scheme falls within the current ‘non EEA national’ Points Based Scheme (PBS) framework. The benefit of the category is however arguably small and niche; just 200 individuals with exceptional talent or promise are able to enter the UK in this category, subject to meeting some pretty high benchmarks and securing Tech City UK’s endorsement. Expanding the quota would potentially go some way to ensuring the brightest and best continue to have access to the UK market, although in the absence of alternative immigration categories, and expansion, the current quota would be rapidly met.
The alternative Tier 2 is the only UK immigration category in place at the moment which enables a UK employer to sponsor a non-EEA national to work in the UK. In the absence of an agreement with the EU, it may also be the route through which UK employers must sponsor EU nationals in the future, although a limited number of tech roles are recognised as being ‘shortage occupation roles’.
In order to sponsor an individual in the UK, the UK employer must first secure a licence from the UK authorities, which in itself can be onerous. In doing so, the company agrees to abide by some strict (mainly HR based) requirements. Cost, however, remains an issue. Changes devised and implemented in line with a strategy to reduce net migration, and before Brexit was a reality, have resulted in government fees soaring from around £1,500 to £7,500 for a 5 year visa within the past year. A consultation on the post Brexit UK immigration landscape is ongoing, and this may of course result in change, but the findings of the Migration Advisory Committee (MAC) are not due to be published until Autumn 2018, just months before the current Brexit date of March 2019.
What will happen to non-European workers in the tech sector?
Non-European employees in the UK should be relatively unaffected by Brexit, and those seeking to enter may still be able to do so under the existing points based system categories, including Tiers 1 and 2 as outlined above.
New applicants outside the UK may, however, find that they are faced with significantly higher competition for roles. If no changes to Tier 2 are introduced, employers may also be frustrated by the current cap on Tier 2 being more consistently reached. The current annual quota of 20,700 Restricted ‘Certificates of Sponsorship’ (restricted ‘work permits’ requested by employers from the Home Office) exists for the whole of the UK across all business sectors. It has been reached just once in 2015 following the cap’s introduction in 2011, but this is likely to become a regular occurrence if the recruitment of EU nationals is also placed into the existing system.
Which cities are likely to be most heavily impacted in the UK?
One in five tech jobs in London are filled by an EU citizen, according to the REC. However, 68% of UK digital tech investment in 2016 was made outside of London with Edinburgh, Cambridge, Bristol & Bath, Oxford, Manchester and Sheffield attracting almost £700 million of investment between them. If tech companies are going to find it difficult to retain or attract EU workers, the pinch is going to be felt across the UK - not just in London.
What of those European nationals already in the UK?
Under current EU law, EU nationals who have been working in the UK for a continuous period of 5 years are deemed to have secured UK Permanent Residence, which secures their long term ability to remain in the UK. They do, however, need to submit an application to evidence that right, and it is a pre-requisite should they wish to apply to naturalise as a British national a year later (subject to eligibility). The UK government recently proposed that EU nationals holding PR status would need to apply for a new UK ‘settled status’, which would bring them under the UK’s legal jurisdiction rather than the EU’s. Whilst no details have been provided, assurances have been made that this would be a painless and straightforward application to make.
The UK government has gone on to propose that:
-EU nationals who complete 5 years residence in the UK before a specified date (yet to be announced but likely between 29 March 2017 and 29 March 2019) will be granted ‘settled status’.
-EU nationals who entered after the specified date, will be granted a temporary status to take them to five years, at which point they may apply to settle.
One way or another, all European nationals will be expected to apply for residence documents and their existing documents will no longer be valid. The same rules will apply to any family members. The government is proposing a two year grace following Brexit within which EU nationals may make their applications.
Brexit's some time off - we have time don't we?
Yes and no. Whilst the negotiations are ongoing, albeit they are moving very slowly, the impact of the Brexit referendum has already begun to bite. Fewer EU nationals are coming to the UK to work, more EU nationals are returning to their home countries, and employers are finding it increasingly difficult to source talented staff. UK tech companies should be developing their strategy to support existing staff and engaging now with their EU nationals – ensuring they are aware of their options, and are aware of the level of support their employer can provide. Retaining your existing EU talent should be the first priority.
Thereafter, UK tech businesses need to be considering how they will source their talent down the line. If the focus will shift to nurturing and progressing home grown talent then arguably plans need to be made and implemented now. Are work placements for university students an option? Would you be able to offer a year’s placement as part of a sandwich degree course? The UK has some of the best universities in the world - are you doing enough to attract the best and brightest the UK is producing?
What can tech businesses do now for their European workers?
Many EU nationals in the UK have ‘thrown their lot in’, bought property, and have children in schools and higher education. In the aftermath of the referendum vote many EU nationals have already left, feeling they were no longer welcome in the UK. The devaluation of Sterling following the vote also reduced the appeal of ‘earning the pound’. Our experience suggests that in the absence of engagement and certainty, more are making plans to leave.
Communication is key. A ‘town hall’ event, where potentially affected EU staff are gathered together for a presentation and Q&A session with the business and / or an immigration advisor, have been well received. An update on the current state of play, immediate options available, to what extent the business will support and where to find support internally or externally breeds loyalty; your EU colleagues will welcome that you care.
Thereafter, stay abreast of changes, government proposals, policy announcements, key dates and more, and share this information with your affected population.
Are there any other immigration routes available to the tech sector to utilise?
Immigration routes for all migrants are pretty limited, although the tech industry benefits from the availability of the Tier 1 (Exceptional Talent) visa category, which we mentioned before, as well as the existing Tier 2 visa route.
Successful Tier 1 applicants are able to work in the UK on an employed, self-employed or employee basis. This is currently the only UK PBS category which affords migrants this freedom (other than if you have £2m you can invest in the UK). Tier 1 (Exceptional) Applicants must secure endorsement from Tech City UK as either possessing exceptional talent or exceptional promise. Those applying under the Exceptional Talent route must demonstrate a proven track record of innovation in the tech sector. Those applying with Exceptional Promise must provide examples of innovation as a founder or employee in the tech sector. Applicants can also rely on recognition of their work outside their immediate occupations, so long as it has contributed to the advancement of the tech sector.
Not only is the benchmark high but as mentioned previously, the Home Office has allocated only 200 visas per year to Tech City (albeit they did increase this to 250 last year). This is a complex process and in any event unlikely to meet demand.
In the alternative, UK employers can make use of Tier 2 for skilled non EEA migrants coming to the UK to work for a specific company. There are still hurdles to overcome; minimum salary requirements and a resident labour market test among others. For SMEs this can be a costly and lengthy process. A small company sponsoring someone for the first time under Tier 2 will find that it will take around 6 months from the point they realise they want to sponsor someone to the time that person can actually start work in the UK.
George Koureas, Partner at Fragomen
Image Credit: D Smith / Flickr