By Frank Hollmeyer
Britain’s Brexit vote has created huge uncertainty about how it will affect the financial services sector, but HR professionals in the City are taking a pragmatic approach to the UK’s withdrawal from the EU.
BUSINESS AS USUAL FOR HR CHIEFS DESPITE BREXIT UNCERTAINTY
HR executives across capital markets and asset management insist that it is “business as usual” despite the lack of clarity about the details of how Brexit will work.
A survey conducted by JD Haspel on the impact of Brexit shows that HR professionals are taking a common sense view and despite some concerns – such as the impact on hiring costs – there is no sense of panic.
Prime Minister Theresa May has removed some of the uncertainty by declaring that she wants to invoke Article 50 of the Lisbon Treaty and trigger formal Brexit talks by the end of March. In February a major hurdle was cleared when MPs voted strongly in favour of the Brexit bill.
Mrs May wants to deliver a smooth and orderly Brexit, but key issues to be resolved include securing UK access to the EU common market, retention of passporting rights and London’s future as the international hub for euro clearing.
Even those confident that the City of London will remain Europe’s leading financial centre are nervous about the impact on the costs and ease of recruiting the overseas talent on which it heavily depends. Costs are expected to increase due to higher legal costs, visa application fees and administration expenses.
Against that backdrop of a febrile political atmosphere and concerns about the City’s future, the JD Haspel survey shows that HR professionals are determined to step back from the drama and retain a matter of fact and realistic approach.
Asked about the UK prospects for their company over the next three years, 45% were neutral, moderately optimistic or even bullish about the future.
Those findings back up the anecdotal evidence that JD Haspel has found pointing to resilience among HR professionals and a determination to find solutions that benefit the human capital strategies of their organisation and also serve current and future employees.
As one senior executive of a global investment bank put it: “After the initial shock and panic things have calmed down significantly.”
VOTE DOES NOT KNOCK RECRUITMENT OFF COURSE
The JD Haspel study asked whether the business environment in the UK had changed since the referendum and the overwhelming response – 81% of respondents – was that it had been “business as usual”.
More than 62% gave the same response for the outlook for the rest of 2017 and looking to 2019 – when Brexit may have taken place – 73% were still neutral or positive.
That neutral or quietly confident approach is reflected in hiring activity, with 75% of respondents seeing no noticeable impact from the referendum and even though 24% saw a slowdown in hiring and only 1% reported a freeze.
The European head of HR at a global private equity firm noted: “It’s almost as if Brexit hasn’t happened. We have not curtailed our hiring plan, nor has the referendum had an impact on the attractiveness of our open roles as far as non-UK European applicants are concerned.”
The chief of staff at a European investment firm was even more upbeat, stating: “We have seen an increase in hiring because we have a growth agenda.”
Even where hiring slowed down, 90% said they had not seen roles moved outside UK.
MINIMISING IMPACT FOR BUSINESS AND EMPLOYEES
If there is a quietly upbeat mood that does not mean HR teams are not prudent. Rather, they are preparing for all eventualities.
Some 78% have already taken contingency measures to mitigate any adverse impact from Brexit and 67% said they were likely to draft plans in 2017.
Asked what those plans involved, 41% said relocation of specific business entities to EU member states and 6% relocation of entities outside the EU. None expected to move headquarters or entire-UK based operations.
HR chiefs are considering a broad range of other, less drastic measures, designed to minimise the impact of Brexit.
As one head of HR at a global asset management firm put it: “What we have been doing is trying to look at the political, legal and regulatory data, to understand what the possible implication can be for our business units and for our staff.”
That was backed up by the head of HR at a global commercial bank who added: “As a firm we have been working with immigration law specialists to keep the business and employees informed.”
LONDON’S ROLE IN FOCUS AS EUROPE HUNTS FOR TALENT
London clearly remains a magnet for global talent and none of our respondents said the Brexit vote had severely impacted their ability to recruit from overseas. In fact, 78% said there had been no noticeable change and only 22% reported a moderate impact, though the proportion expecting a moderate impact in 2017 rose to 32%.
As one private equity HR chief said: “Our staff do not want to leave London. People do not want to live in Luxembourg or some Swiss canton.”
Reflecting a subtle shift in mood, nine out of ten respondents said that before the vote, they thought London was the best location to develop their career, but that slipped to just over half after the vote.
Although 70.2% thought Brexit would have little noticeable change on pay, we believe it will increase the costs of hiring EU nationals, though given the size of City compensation packages those costs will be relatively small and the impact on financial services will not be as great as on other sectors.
A more important factor will be competition for talent from other financial centres in Europe.
The head of HR at an alternative investment platform commented: “Ultimately Brexit will drive up compensation levels as competition for talent from other centres such as Paris or Frankfurt increases.”
The shockwaves from the referendum result are still being felt across the UK, Europe and the rest of the world.
There is no doubt that Brexit could have an enormous impact on UK financial services sector, but HR professionals are rightly focused on the job in hand, and not getting overly distracted by what may or may not happen in the future.
So far, few major changes to the business environment or hiring trends have been reported. There is a sense of proceeding with caution and drawing up robust contingency plans ahead of the divorce papers being served.