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Article 50: What now for contractors?

30th March 2017

Article written by:

iContract

On Wednesday, British Prime Minister Theresa May formally triggered the long awaited Article 50 of The Lisbon Treaty. officially signalling Great Britain’s intention to leave the European Union, or as it’s been commonly known – Brexit. With the triggering of this article, the complex negotiations of the UK’s withdrawal from the EU has now begun. This will mean that the official date for Great Britain leaving the European Union is likely to be around April 2019. How these withdrawal negotiations will play out over the next two years remains to be seen, and what state good or bad this will leave Great Britain in socially and economically is another difficult question to answer. Whether or not these negotiations will be complete within the allotted 2 years is also another possibility with there being room to extend the length of these discussions if needed. Will the UK get the best possible deal within these 2 years?

One area that has gathered widespread discussion has been the impact the negotiations will have on the contractor market. Since the referendum results were announced in favour of Brexit, some have argued that they’ve seen Brexit have a positive impact on the state of contracting, But what about the long term prospects of contracting? There is so far a wide array of opinions pertaining to what the full term effect of Brexit will be when looking at contracting – here are some points up for consideration;

Will the boom continue?

In the wake of Brexit, we saw a number of companies react with caution. In typical British fashion, they watched the initial storm blow over and approached the news with simple and sensible measures, waiting for the situation to settle down before assessing their next move.

This was reflected in the way companies began hiring. Until the situation became clearer, companies up-scaled their contractor hire and approached their full time and long term hiring with a bit more austerity. Rather than obligate themselves to the financial commitments of full time hiring with no clear idea of the financial repercussions of Brexit, companies opted for the more agile and flexible model of contractor hiring.

Since Brexit, we’ve continued to see a boom in contractor numbers. With more companies reluctant to hire full time during these uncertain times, more organisations are hiring contractors to carry out work. Given the huge investment that full time employment carries with benefits such as medical and pensions to be considered, companies have opted for the short-term fix of contractors which is more flexible and less risky financially.

With more companies looking to play it safe over the next 2 years, expect more contractors to be hired in reflection of this trend. However, whether this boom is set to continue post negotiations and full withdrawal, is still up for discussion. Whatever the outcome of negotiations, companies may not see the full impact of Britain’s deal with the EU for another year, or may even see a more immediate affect. The recent backtracking by the Government on the National Insurance hike for the self employed may be a sign that Theresa May’s government recognise the importance of the self-employed workforce to the UK economy and will prioritise them in negotiations. We will have to wait and see.

A European workforce or not?

The freedom of movement of EU nationals was a source of controversy in the debates leading up to the referendum last June. This freedom of movement allowed companies to hire labour in from other EU states to help plug gaps where there may have been a skills shortage. Now with the Brexit result, the status of may of these EU workers has been put into question. If the consequences of Brexit means a more complex system for EU workers entering the UK workforce, this could alter the balance of the European and British workforce in the UK and could possibly have a knock on effect for the contractor industry. With less competition in the workforce, this may increase day rates for UK contractors and this may not be seen as a desirable investment for certain companies.

However, since Brexit we’ve seen the pound weaken and this may even have a positive effect with investors given more spending power in the UK.

This point again falls on the government and what they recognise as key economic factors to the UK and if they prioritise them accordingly. As well as recognising the importance of the self-employed, the government may also recognise the role EU contractors play in filling those gaps where there are skills shortages. Prioritising EU contractors in negotiations may ensure a continued competitive market for contractors in the UK.

A whole new world

What relationship the UK has trade wise with the rest of Europe is yet to be determined, but the country’s removal from the European Union could open it to new and untapped trade agreements globally.

USA and India represent huge potential to the IT contractor industry in the UK. Could a deal then be brokered with these countries and outdo any previous deal done with Europe? Maintaining the Special Relationship with USA will be both important and challenging. A challenge not just because of Brexit, but for the unpredictable behaviour of new Commander in Chief Donald Trump.

Does this change contracting for good or worse?

Working as a contractor can be extremely rewarding. The flexibility it allows, the diversity it allows and rate of pay are all attractive working perks for the contractor community. Could this all change when Brexit comes into full effect? Currently under the EU, Great Britain works within its framework of employment rights. Certain employment laws may be reviewed by the Government with more scrutiny when it comes to the withdrawal process. The Government’s now abandoned plans to increase National Insurance for the self-employed has been regarded as a disguised attack on them. Have the contracting world never had it so good and will that all change with Brexit?

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