This is How Senior Business Leaders Are Preparing for Brexit

Written by Brian Groom Tuesday 06 November 2018
From reassessing business models to investing in employees, UK leaders reveal how their organisations are preparing for Brexit – and what this means for managers
London landscape and UK and EU flags

Think of Brexit’s impact on management and people, and you probably think of concern over who will pick fruit on the UK’s farms and whether there will be enough European workers to staff hotels, hospitals and factories.

Shortages of EU migrants may indeed be starting to bite in some industries, but the challenges for British managers posed by the UK’s impending departure are far broader. Coupled with global trends such as digitisation and automation, Brexit is raising questions about whether business models and ways of working need to be rethought – and whether managers are equipped for these changes.

Change Management Skills Will Be Crucial

Norman Pickavance, former human resources director at Wm Morrison,the supermarket chain, believes the UK is moving from a period in which abundant cheap labour saw heavier use of outsourced temporary workers to one in which demand for labour starts to exceed supply.

“It starts to paint a picture of a very different landscape to the one we have had for the past ten to 15 years in many UK industries: more automation, more innovation, fewer people; and those that you have will have higher skills and be better paid. To handle that, you need better managers,” says Pickavance, who is now chief executive of thinktank Tomorrow’s Company. This, he adds, will require new capabilities at every level, from the shop floor to the boardroom.

Rita Trehan, a global HR strategist who was formerly chief HR officer at Honeywell and AES Corporation, also sees Brexit as part of wider social and economic “disruption”. Her advice? “Use this disruption as an opportunity to rethink how we look at talent and how we define the way we work. It’s a great opportunity to say what we would do in a greenfield situation. How can we make sure we retain the best talent?”

Stephen Pierce CCMI, deputy managing director and chief HR officer at Hitachi Europe, describes Brexit as “one of the biggest changes, if not the biggest, we have seen… Change-management skills and capability are going to be critical to the future. It’s important that we view Brexit as another change, because change is happening all the time.”

Will Brexit Affect Companies’ Ability to Attract Talent?

Business may be innately resilient, but uncertainty over what form Brexit – due at the end of March – will finally take has been frustrating for managers. After an initial phase of assessing vulnerabilities in their workforce and reassuring employees from EU countries that they are valued, businesses have waited for months to know what, for example, post-Brexit immigration rules might look like.

This is no marginal issue. There are 2.28 million EU nationals working in the UK, or 7.1 per cent of people in employment, according to the Office for National Statistics. Non-EU nationals account for a further 3.9 per cent. At managerial level, four per cent of those in employment are EU nationals, mainly from Western Europe, with a further four per cent from non-EU countries.

The government has announced a scheme whereby EU citizens who have lived in the UK for at least five years will be able to apply for ‘settled status’ after Brexit, but its proposals for rules on new immigration after the planned transition period ends in December 2020 are not due until this autumn.

Speculation that the UK could leave next March with no deal has added to the uncertainty, although home secretary Sajid Javid has said that EU citizens already living lawfully in the UK would be able to stay “no matter what happens”.

The labour market is already feeling the impact. The number of EU nationals working in the UK has dropped by 86,000 over the past year, the largest annual fall since comparable records began in 1997, probably because of the weak pound and uncertainty over how long they will be able to stay. This has been offset by an extra 74,000 non-EU nationals: it could have been more, but the cap on skilled workers entering under ‘Tier 2’ visas has been reached every month since December.

Hitachi Group is a significant UK employer, with 5,000 people in UK businesses (and 15,000 across Europe), in everything from trains to nuclear power, and digital to construction equipment. Like other organisations, Hitachi has been looking at the extent to which it relies on EU staff and what the potential outcome might be.

“When I talk to EU workers, they remain very committed and focused, and say they don’t really know what will happen,” says Pierce. “They are not panicking.” Senior executives in Tokyo have affirmed Hitachi’s commitment to its UK businesses and their employees.

“With Brexit, the question is to what extent the talent pool will get smaller and/or what the hurdles to continuing our existing approach to building our global talent pool will be,” Pierce adds. “Once we have an agreement, we will have to move quickly on these things.”

At the restaurant chain Pizza Hut (Brexit motto: ‘Keep calm and eat pizza’), any shortage of EU migrants is most likely to affect the company in urban centres such as central London, says chief people and marketing officer Kathryn Austin CCMI (below). There could be some local pressure on wages, though the high cost of operating in such areas (for rivals too) creates a natural ceiling for capping unplanned pay inflation. Pizza Hut is doing relatively well in an industry where others are struggling, so it has more applicants than it needs. “We are known for riding out the bad times. We have been around for 40 years,” says Austin.

“Nobody knows exactly what’s going to happen; you can only focus on what you can control and make progress with,” she continues. “We are spending probably more time than ever looking at talent pipelines, changing some of our training and development.”

Read more: How to attract top talent

Investing in Staff Will Be Key

Many HR leaders believe Brexit underlines the need to invest in developing staff. It comes amid a wider debate about whether British managers are undervalued and undertrained, contributing to the country’s poor productivity record.

Austin believes Brexit adds impetus to tackling the issue of ‘accidental managers’. “It creates a driving force, doesn’t it? I don’t think any company will have the luxury of being able to appoint an accidental manager. I do believe leadership and the managers in key positions within an organisation are absolutely critical to productivity,” she says.

For Hitachi’s Pierce, the question is: “Where should we invest and what is the focus? Whatever happens, we clearly need to be investing in our people, not least because the world is changing and, if you don’t help to equip your people for the future, then you are missing an opportunity to succeed more quickly and adapt to changes in the market.”

Pizza Hut is focusing on behaviour development among its staff. It invests in a character-development programme for managers called ‘Heartstyles’, which encourages the development of individual behaviour and working constructively as part of a team. Austin explains: “We really focus on our managers and leaders understanding their own impact and what triggers both positive and negative behaviours; we teach our managers how to grow people’s character and capability.”

The company also commits to apprentices at all levels from Level 2 to MBA, though she thinks the government’s apprenticeship policies need further reform to focus on “developing young adults in a commercial workplace versus kids in the classroom”.

Austin adds that, after Brexit, “there will definitely be an emphasis on developing the right skill base and holding on to people, and, naturally, when you hold on to people for longer, they get the opportunity for further development, so you organically create the skills you need”.

“It’s impossible to predict the future, so don’t try,” says Trehan, arguing that companies should consider three or four alternatives to how they work now in case Brexit restricts the flow of talent. People work in many different ways, she adds, noting that companies can sometimes obtain skills they need via tech platforms from workers in distant locations. And they can use artificial intelligence to rethink the kind of jobs people do.

She also suggests chief HR officers should “step up, get out of their comfort zone and show they can help shape the business. We are always arguing that we don’t want to be just doing transactional stuff – we want to be strategic”.

Uncertainties Over Brexit

Tamsin Sridhara leads the UK rewards and talent business at consultancy Willis Towers Watson. Until recently, multinational clients were fairly relaxed about Brexit, she says, seeing it as “an issue, but not a hugely disruptive issue”, compared with global trends such as automation and the move to online.

However, over the summer, more clients started getting in touch in response to the suddenly higher possibility of the UK leaving with no deal. They wanted to revisit contingency plans: logistics companies, for example, had to work out what to do if there were border queues.

“They’ve had to reassess, but it has varied greatly between sectors and even within sectors, depending on their business model and staffing model,” she says. In retail, those who source mainly from Europe face a different situation to those who source from outside.

And it’s not only big companies feeling the uncertainty. James Smith, director of Primal Europe, a Plymouth-based supplier of cycling clothing – and a CMI Chartered Fellow – faces questions about whether customers will end up paying tariffs on its products and what the status of contracts with agents will be.

His business has benefited from having young EU citizens as interns or work experience trainees – one intern from Germany did a full German translation of the company’s website and now works as its agent there. Recently, however, “the offers have dried up a bit”.

Smith longs for clarity: “In general, business is very resilient and flexible. At some point we will need to be advised what we need to do. I know we are in a brinkmanship phase right now, but it’s pretty unfair on British businesses to treat them like this. It’s incredibly confusing.”

Image: Shutterstock

Brian Groom

Brian Groom

Brian Groom was, until recently, an assistant editor at the Financial Times