On June 23, in a hotly contested national referendum, citizens of the United Kingdom voted 52 to 48 percent in favor of Brexit, the UK's exit from the European Union, according to BBC News. The historic vote has already had an effect on global markets. CFOs and financial leaders now confront an international business landscape rife with currency volatility, financial uncertainty and a cavalcade of global political question marks.
Immediately after the vote, UK Prime Minister David Cameron, who hoped his nation would remain in the EU, announced his resignation. "I do not think it would be right for me to be the captain that steers our country to its next destination," Cameron told reporters, according to NBC News.
Although the leader of the conservative party, Theresa May, has become the UK's new Prime Minister, The Economist explained that plenty of "uncertainties abound ... What will be the future trading arrangements between Britain and the EU and how long will they take to negotiate? What will be the reaction of foreign businesses that invest in Britain?" Only time can fill in those blanks.
During a recent speech, U.S. President Barack Obama referenced a post-Brexit phone call with David Cameron, telling the audience, "I am confident that the UK is committed to an orderly transition out of the EU" and promising that the "special relationship" between the U.S. and UK "will endure" even as the U.S. continues to work closely with its EU partners, as reported by WTKR News.
Brexit's Impact on Human Capital Management
In terms of attracting talent, the UK's inclusion in the EU was a bonanza. Some 2 million workers from the EU, some of them in areas such as engineering and IT where talent shortages abound, worked in the UK at the time of the vote, according to HR Today. Their status is now uncertain, as is the UK's status as a hub for attracting talent from all over the EU.
"This vote could have significant impact on [UK] businesses ability to recruit both highly and low skilled individuals. However, the full extent of this impact won't be known until the trading negotiation position is decided and whether this includes a requirement to implement Freedom of Movement," said Julia Onslow-Cole, legal market leader and head of global immigration at PwC Legal, to HR Magazine.
After the UK officially leaves the EU, all European workers will likely need immigration permission to work there. That would increase the time, cost, and effort required by any business operating in the UK to recruit EU nationals. UK businesses are already required to collect right-to-work information, and Brexit makes that intensive process even more complicated. All of these concerns will now need to be negotiated between the UK government and the EU.
With the UK no longer directly linked to Europe through the European Union, it may become a less attractive place for multinational businesses seeking to use the nation as a convenient jumping-off point to expand into the wider European market. U.S. and foreign firms doing business in the UK may now be considering relocating people and offices from the UK to elsewhere in Europe in order to better connect with the EU trade bloc.
Among the many steps on the path back toward stability, the UK will have to negotiate trade agreements bilaterally with EU member states. Another question to be answered is whether the UK will continue to use a framework of EU business regulations and standards that have been developed over the last few decades or go in another direction.