Brexit: the impact on the workforce

Toxic accusations of fudged up figures still ringing in his ears, leader of the Stronger In campaign Stuart Rose delivered a spectacular own goal last month. The former boss of M&S admitted to a stunned Treasury Select Committee that Brexit would mean a block on migration, which in turn would give a boost to UK workers on low wages.

Brexit campaigners leapt on the comments with glee. By “giving a straight answer to a straight question” Rose had helped make the case for Brexit by spelling out the advantages to British workers of a vote to Leave, declared MP Steve Baker.

But political blunder aside, Lord Rose had also illustrated the complex debate around Brexit and its potential impact on a labour market increasingly tied up with the European Union. And if Brexit does take place that impact will be keenly felt by the food and drink industry, both as one of the UK’s biggest employers by sector, and one of those most reliant on EU migrant workers. So what could be the impact of Brexit on both fmcg’s migrant workforce, and the working conditions of its three million UK employees?

EU migrants help put food on our table. Nearly one third of the workforce in food manufacturing is made up of people who have travelled from one of the EU’s 27 other member states, according to ONS figures (see box). That’s 27% of the 400,000 employed in food and drink production as well as 11% in foodservice and 6% in farming. Though non-EU migrants continue to outweigh those from the EU across the whole UK workforce, in areas such as food and drink, where there are a high proportion of low skilled roles, EU workers continue to dominate.

Poor pay and the low status of work in the food industry has left employers turning to these EU migrants in their droves, according to professor of food policy at City University Tim Lang. “You wouldn’t get very much fresh fruit and veg if it weren’t for migrant labour,” he says. EU migrants “come from cultures where food matters and so they don’t see it as a low status industry to work in”, in contrast to British workers who are more reluctant to accept increasingly squeezed wages.

An exit from the EU could be disastrous for employers reliant on these migrants, say Remain campaigners, because it would mean an end to the free movement of people, leading to far greater restrictions on recruitment.

While there is consensus that existing migrants would not be repatriated (despite controversial comments to the contrary from former UKIP MP Mark Reckless), Brexit could lead to new EU migrants facing the same border controls as those from non-EU countries. And that would require fmcg firms to “significantly change their business model” argues Madeleine Sumption, director of the University of Oxford’s Migration Observatory.

The change could require employers to apply and demonstrate that any EU migrant matches job criteria in advance, as well as advertising the job to UK workers beforehand. This processing could take weeks and add HR and legal costs to all recruitment, says Sumption.

However, she adds the “much bigger aspect” is that only a relatively small slice of the UK workforce is eligible for skilled migration. Only migrants applying for graduate level positions earning at least £20,800 (set to rise to £30,000 in coming years) would currently qualify to work in the UK. In other words “it wouldn’t be possible to hire someone for a minimum wage job in food processing or retail” adds Sumption. “Applying for visas on these jobs is not an option.”

To offset the impact, the government may reintroduce schemes aimed at low skill occupations, such as the Seasonal Agricultural Workers Scheme, which allowed fruit & veg growers to recruit seasonal migrant workers from Eastern Europe until its abolition in 2013. “But in the past these have been relatively narrowly defined so it wouldn’t be an option for an employer to use them for any job,” says Sumption. 

Ultimately a change to migration policy from the EU could result in a huge shortage of workers in low skilled roles. And a wage hike could be the only means of tempting replacements, suggests Investec analyst Nicola Mallard. “They’re typically not nice jobs,” she says. “Standing in fields picking things, harvesting where you can’t use machines, or factories that are cold and wet. The only way around that is to pay a bit more.”

Compounded by the arrival of Osborne’s new national living wage, this prospect rings alarm bells for business, a fact that led Lord Rose to surmise it would “not necessarily be a good thing” as he discussed the problem before MPs on 2 March, although Brexiteers condemned the “ermine clad member of the peerage” for failing to recognise the benefit for the British public.

Alternatively, manufacturers could mechanise more processes to reduce the need for staff, suggests a report from the Migration Observatory, but “both these options are likely to raise costs, which may be passed on to customers through higher prices”.

Single market

Not so, insist experts from the pro-Brexit camp. A vote to leave would not put an end to the free flow of workers nor introduce tighter restrictions, says political consultant Dr Richard North. The UK would keep its place in the European Economic Area’s (EEA) single market, alongside EU member states, plus Norway, Iceland and Lichtenstein. And in the single market, free movement of people is a founding principle. “The four freedoms of goods, services, people and capital are an intrinsic part of the single market, you can’t have one without the other,” says North.

The finer detail of this agreement would be thrashed out under Article 50, the exit clause of the Lisbon Treaty, but “all the options involve remaining part of the European free-trade zone that stretches from non-EU Iceland to non-EU Turkey” says MEP Dan Hannan. “No one in Brussels argues that Britain would leave that common market if it left the EU.”

Under their own EEA agreements, Switzerland and Norway have proportionally far higher levels of EU migration than the UK, according to think tank Open Europe, with migrants making up 7% of the Norwegian workforce. At the same rate per head as Switzerland, the UK would welcome four and a half times more migrants than it does now.

North argues that outside the EU the only material change would be the ease with which the UK could apply an emergency brake on migration to exclude all or certain classes of migrants.

Under the terms negotiated by prime minister David Cameron, this clampdown can only take place with permission from the European parliament, whereas as an independent state in the EEA it could do it unilaterally and justify it later.

“It’s the best of both worlds,” says North. Application of the brake would only be “short-term and specific” with no blanket impact on EU recruitment and, besides, “you wouldn’t do it if it was contrary to your own commercial or economic interests”.

Free from the EU, the UK could also more easily recruit from elsewhere in the world, adds MP Owen Paterson. “Taking back control of our borders means we can establish our own immigration rules and bring in skilled labour for the agriculture and food industries, not just from Europe but from across the world in a targeted manner,” he says.

Yet in or out of the EEA a vote to leave the EU puts fundamental employment rights that benefit all workers at risk, warn those fighting for Bremain. Both the Working Time Directive (WTD) and the Directive on Temporary Agency Work (see box) started life in Brussels and allow all working Brits paid holidays, tea breaks and the right to clock off after a 48-hour week.

Despite issues enforcing the rules in smaller firms, they “make a substantial difference to a large number of workers” says professor Jason Heyes, chair of employment relations at Sheffield University.

And with the abolition of both the Agricultural Wages Board and the Sectors Based Scheme in 2013, both of which monitored pay and conditions, EU regulations have become increasingly important for workers in food manufacturing in particular.

Yet the regulations remain a bugbear among Eurosceptic Tories. Announcing plans for radical reform of the EU back in 2013, Cameron failed to articulate a single EU law he would look to alter, except for the Working Time Directive.

“It’s seen as an impediment to an employer’s ability to utilise labour in ways that are supposedly efficient and enable them to control costs. It’s seen as an unnecessary regulatory burden,” explains Heyes. In a more right-leaning government post-Brexit, “it’s not hard to imagine a scenario in which some of these rights will be diluted.”

Kids up chimneys? Absolute bullshit!

“In theory there is nothing to stop a parliament from undoing what previous parliaments have done, and the government could, post-Brexit, repeal such pieces of legislation without the risk of infringing EU law,” adds Charlotte O’Brien, leader of the EU Rights Project.

“Total absolute bullshit,” retorts North, “this idea that we’ll start shoving kids up chimneys because we’re going to leave the EU.”

He insists that not only is the UK way ahead of EU minimum standards on many employment rights - in areas such as maternity and paternity leave - but the broad framework of protections that workers enjoy derive not from Brussels but from the International Labour Organization (ILO), of which the UK is a fully paid up member in its own right.

Even the controversial 48-hour week loathed by many politicians and businesses alike is set out in the ILO’s Hours of Work Convention. So the “idea that Britain would abandon hard-earned labour protection is risible, it’s not even on the agenda” North adds.

Unpicking rules and regulations is far from straightforward and “it is far from clear whether there would be a parliamentary majority in favour” either, adds O’Brien.

And despite employment rights often being conflated with burdensome Brussels red tape by business, it’s far from clear whether their removal would benefit fmcg bosses, either.

“Any small, short-term advantage that some employers felt in waiving these would have to be offset against worker health impacts, motivational impacts, reputation impacts and long-term productivity and competitiveness,” she adds. “Changes that impact disproportionately upon, and work to exclude, women, reduce the talent pool, the workforce at large, and productivity.”

But if the business benefits of workers secure in their rights goes without saying, it’s clear that the wider ripples of a Brexit on food and drink’s workforce remains up for debate.