Thursday’s historic referendum will see Britain leave the European Union. On Friday, we witnessed a significant depreciation in Sterling to a 13-years low, the stock market plunged and David Cameron resigned. Facing all these political and economic uncertainties, what does ‘Brexit’ mean for contractors?
1. Permanent hiring stall will boost demand for contractors
In any period of economic uncertainty, companies react by tightening budgets and stalling permanent hiring. In order to fill in interim labour demand gaps, they are likely to turn to a more flexible model by using contractors. This is exactly what happened after the financial crises in 2008. Freelancer numbers have increased from 1.4 million in 2008 to 1.9 million in 2015, a rise of 36%. 2008 – 2009 was a period of prolonged economic uncertainty, during which period unemployment increased by almost 50% before falling by a third.
A significant part of the labour market recovery was led by the flexible work force. The scenario today with the market uncertainty from the EU referendum shares a lot of common factors with the financial crises in 2008. It leads to greater demand and more job opportunities for contractors.
2. Political and trade negotiations will create legal and compliance projects
A grace period of two years is given to transform our economy into the new structure independent of the EU. During this time, all trade treaties have to be re-negotiated country by country. Our legal and regulatory framework will need to be reviewed and adjusted accordingly to accommodate the changes. Companies and banks will need interim staff to review and implement these new market practices. Together with companies’ permanent hiring stall, the majority of these work requirements will be released in the form of legal and compliance projects filled by contractors. By pre-registering with our platform, we can help you to stay at the front seat as these opportunities come up.
3. Uncertainties in labour movements and visa requirements
So what does it all mean for EU citizens working here in the UK? There is a large population of skilled workers from Europe in banking, legal and IT sectors, whom have contributed tremendously to our economy and tax revenue. London will not be able to sustain as a global financial hub without its international workforce. The same goes with the technology sector, where the strong support from the government on entrepreneurship in form of tax benefits for early stage investors, and a strong entrepreneur community with various events in the recent years has boosted London’s reputation as the upcoming hub to attract tech startups. However, without the free movement of labour, it will have significant negative impact on its capability to attract talent. So far, no one knows what will happen on this front, but we hope the next leader will implement a policy to retain our global talent pool.
4. The financial impact to contractors
Let’s recap what happened in the financial markets last Friday when Brexit was officially announced. Sterling suffered a jaw-dropping plunge from $1.5 against USD to $1.37 on closing. The London stock market has suffered deep losses at the open, but recovered to finish down 199 points or -3.1%. It also caused losses in global equity markets, wiping off over $2.1 trillion in value. Moody’s has cut the outlook on UK debt to negative. Friday’s losses might only be the beginning, facing the uncertainties ahead, the market might suffer more before it recovers.
A bear market will lower consumer confidence level and might lead to a correction on property prices. The London housing might finally start to adjust and become more affordable. With low consumer demand, coupled with low inflation, current budget and fiscal deficits, interest rates are likely to remain low if not going towards the negative territory.
If you are a contractor who is looking to put down that deposit to buy your first property or to add more into your investment portfolio, it might be a good time to step back, observe the market, wait for the potential correction before you act. You can find more financial advisory and tips in our Contracting – Financial Matters guidebook.
Nothing is going to change in the immediate term and David Cameron will stay in office until October to ensure economic and political sustainability. The next two years will be a very interesting but potentially painful period for Britain to adjust into the new structure.
As a contractor, it might not be so bad after all. Economic uncertainties sometimes create new opportunities and contractors might be the one to benefit. Want to find out what happens next and obtain useful tips?