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Wendy Chowne: After Brexit, the only certainty is uncertainty

29 July, 2016Wendy Chowne

The tumultuous UK political manoeuvrings of the past two weeks have impacted, and will continue to impact, both on the way in which financial service institutions operate within the UK and on the way in which companies in general manage their human resources. Whatever affiliations we may individually have, the only sure certainty is uncertainty. 

The UK political situation is (at time of writing) as yet unclear but the Bank of England and the Chancellor are determined to pursue responsibilities for monetary and financial stability, whilst expecting some market and economic volatility as the process unfolds. FCA Chairman John Griffith-Jones has confirmed the FCA’s intent to actively pursue its responsibilities and has emphasised to all banks that 'at the appropriate moment, you are able to inform the government where your major opportunities and risks lie, along with other industries, as it forms its plans for the negotiation of our exit'.

Consultation between the Bank of England and the Big Five has already started and it is clear that this will continue and extend. For the moment financial regulation based on EU legislation remains in place, and indeed some such as MiFID II are being integrated ready for the start date of January 2018. Some industry commentators are expressing discontent with the assumption that EU legislation will be replicated within the UK whereas others fear the risks which any renegotiation might cause.

Employment law is another area which, to date, has been underpinned and arguably progressed by EU legislation. Employment rights were articulated under the Treaty of Rome with equal pay specifically addressed under Article 119, and this was in 1957!  In comparison the UK introduced the concept through the Equal Pay Act in 1970, however as noted by TUC General Secretary Frances O’Grady, the requirements fell short of those articulated within Article 119. It is also worth noting that continued imbalances persist within the UK despite updates such as the Equalities Act of 2010. In April 2015 the 'gender pay gap based on median earnings for full-time employees .. [was].. 9.4% ….whereas the gap.. [for part-time employees] .. in 2015 is unchanged from 2014, at 19.2%.'

And this is naturally just one aspect of labour rights which will come under the spotlight following Brexit. All current employment legislation will need to be reconfirmed or renegotiated. For example, EU 'passporting' rules allow freedom not just of goods and services but also of transfer of workers within the EU. A removal of this 'Right to Work' may present challenges for firms who need workers to be mobile within the EU or for those who have non-UK workers. It seems natural therefore that firms within the UK currently express a reluctance to recruit whilst the uncertainty remains, whilst some financial firms are already declaring an intent to relocate.

So, whilst pre-referendum just 15% of executives believed that they were ‘well informed’ about the potential impact of the EU referendum, the reality is that options and risks now need to be considered. As the latest Grant Thornton report states; it is time for firms to 'review contingency plans and assess the possible implications and the risks and opportunities this creates'. The same is true for governments, regulators, sectors, employees, lawyers and all stakeholders. As employees the connection should be made that anything which affects business and trade will affect employees; it is a symbiotic relationship. For students and lecturers of Banking and Management it is going to be a case of watch, reflect on the risks and benefits of the ongoing changes and make sure you keep professionally updated.

Wendy Chowne is a lecturer and examiner at ifs. Find out more about our courses - including our full and part-time courses in Banking Practice and Management.