Britain’s promising but unpredictable labour market
With Brexit looming, what does the future hold for Britain's unpredictable labour market?
The situation in the labour market seems promising, but at this point, it's hard to foretell what the future holds. The unemployment levels haven't been as low since 1975, but the chaos associated with Brexit brings new challenges to the table.
With the unemployment rate of only four per cent, and numbers from TE Forecast showing that in the next few months this number can drop 3.9 per cent, it's hard not to be optimistic. Moreover, the average yearly earnings have grown at a steady pace since July 2018 and will continue to do so at an average rate of 3.1 percent in 2019.
According to James Booth of City A.M., workers in the U.K. should expect to receive a 1.1 percent real-term salary increase (adjusted for 2 percent in inflation) in 2019, which is more than double of what they got in the previous year. That's not a significant increase, but on average, it represents £234.35 of additional annual income before tax.
But there are also a few potential pitfalls on the horizon. One of them could be the UK's heavy reliance on foreign workers. The percentage of foreign-born people contributing to the labour market has increased from 7.2 percent in 1993 to over 18.0 percent in 2018. Most of these workers come from EU countries and are now uncertain about their future.
In the case of 'no-deal' Brexit, European Union (EU) citizens coming to the U.K. would only be able to stay in the country a maximum of up to three months. The Home Office announced that if they wished to stay longer, they would have to apply for a 'European temporary leave to remain' document. These kinds of grim scenarios cause much commotion in the migrant communities and get people thinking about going back to their native countries.
Since the referendum, the number of EU nationals applying to Britain's companies fell dramatically. According to Anna Bodey, a migration analyst for the Office for National Statistics: 'It is particularly important to the wholesale and retail, hospitality, and public administration and health sectors, which employ around 1.5 million non-U.K. nationals'.
Reed, a jobs and recruitment agency in the U.K., surveyed hundreds of businesses, asking if Brexit would have a negative impact on the labour market and gradually drive up the unemployment. Interestingly, 48 percent of them agreed. Another 28 percent claim that they saw a reduction in job applicants from EU citizens. That could potentially cause underemployment in certain vital sectors of the economy over time, such as wholesale, retail and hospitality.
Fortunately, the government is making some efforts to prevent foreigners from leaving. In an update to the House of Commons on 21st of January, Prime Minister Theresa May said she will scrap the £65 fee that 3.5 million EU citizens currently residing in the U.K. would have to pay to continue living in Britain after Brexit. But still, foreign citizens will have to answer questions in an online application if they want to stay in Britain after the country leaves the EU.
Danny Shaw, a BBC Home Affairs correspondent, said that for workers with a clean employment record and good computer skills, these applications should resolve within days. 'But for claimants hoping to bring in relatives, people unfamiliar with computers and those with a more sketchy background in Britain, perhaps involving some cash-in-hand work, the process may be a hurdle they'll struggle with — or avoid altogether', he added.
Such could mean that potentially hundreds of thousands of migrants would stay in legal limbo, which would ultimately motivate them to leave the country.
After May's deal proposal received a rejection by 230 votes, MPs will vote on a modified version at the beginning of February. There are even some signs of open-mindedness from the EU officials who wish to make the deal more manageable. But we shouldn't expect a lot of progress made in the coming weeks and months.
According to Sarah Wollaston, Member of Parliament: 'Plan B is Plan A', meaning, there's no progress at all with the upcoming deal, and we should break the impasse with another referendum. But this is unlikely to happen as it would set a questionable precedent for how future referendums would hold in the U.K.
Despite all this chaos, most industries continue to grow without paying much attention to the political environment. Fintech (financial technology) is one of the best examples. A survey conducted by the London Stock Exchange shows that U.K.-based fintech companies will grow at an astonishing rate of 88 percent over the next three years. Such is due to an increased demand for technical expertise necessary to deal with the next economic downturn and different Brexit scenarios.
Gambling is also on the growth curve in the U.K. The society's view of the industry has changed as more people desire to put up a little bit of money in the hope of winning. The revenue continues to increase online (£4.5 billion out of £13.8 billion in total) with games like classic Texas Hold 'em and bingo being among the most popular titles. But this can quickly change with Brexit, which can impose new regulations, tax laws and change the situation in British territories, such as Isle of Man and Gibraltar, that currently host many of the industry's biggest players.
The other industries poised for high growth are digital marketing and advertising, biotechnology and virtual reality. In other words, all the areas related to technology should continue to grow rapidly, but manual jobs will be at risk due to an increase in automation and the application of artificial intelligence.
In the end, the labour market in Great Britain proves to be extremely resilient and will be able to withstand this tumultuous period in the country's history. We can't fully predict what the future will bring, but barring the world economy won't enter a recession, then 2019 should be one of the best years ever for the U.K.'s economy.
