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RESPONSE OF PENNINGTONS MANCHES LLP TO THE MIGRATION ADVISORY COMMITTEE CALL FOR EVIDENCE ON EEA WORKERS IN THE UK

LABOUR MARKET

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EXECUTIVE SUMMARY

Penningtons Manches is a leading full service UK law firm, with a top ranked immigration

team, which acts for start-ups through to multi-national corporations in a variety of sectors,

education providers and HNW individuals

Following the referendum, the firm launched its Brexit Hub to ensure that our clients were

fully informed and kept up to date on matters which may impact their staff and business. This

included holding Brexit roadshows across all our seven offices, covering immigration,

employment, constitutional, data protection and commercial law matters.

The immigration team was asked by clients to provide assistance to staff members, in the

form of advice sessions, helplines and assistance with residence card/Permanent Residency

applications. Department head Pat Saini was invited to sit on the Centre for London’s Brexit

Advisory Board.

Following the launch of the call for evidence we put together a survey, aimed at those

businesses and entrepreneurs that employ/engage EEA nationals and who believe they will

be impacted by Brexit. A copy of the questions accompanies this submission. Given the

significance of the issue, we were pleased that we received around 200 responses.

Respondents came from virtually every sector (as listed by the UKVI), including

Tech/IT/Digital sector, professional services (such as accountancy, finance or law),

education, arts/entertainment/recreation, retail; construction/real estate, heath/care, life

sciences, manufacturing, hospitality and transport.

Whilst the overwhelming majority of respondents expressed a need and desire for free

movement to continue, following the referendum result it is accepted that free movement in

its current form will come to an end. Any new immigration system that is introduced needs to

take into consideration that the relationship between the UK and the EU has existed for more

than 40 years and that EEA workers have provided businesses with a readily available pool

of workers. These businesses will therefore need adequate time to prepare. In addition any

new system must ensure that it is not overly complicated and does not deter those who the

UK needs to attract. We do however appreciate that reciprocal arrangements will need to be

agreed as part of the exit negotiations.

It was clear from both our survey responses and our wider discussions with our clients that

the current UK immigration system does not work for all and requires an overhaul. However,

this is too wide a question to be addressed at this time and does not form part of the call for

evidence. Nevertheless in our response we have set out below why simply bringing EEA

nationals under the current Points Based System (PBS) will not provide an immediate

solution to businesses.

Businesses need time to prepare and therefore dealing with the immediate issue to hand, the

loss of unfettered access to the EEA labour market, must be at the forefront of the

Government’s policy making/strategy. A two year transitional arrangement following Brexit will

not allow businesses and regions enough time to do this.

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THE CURRENT UK IMMIGRATION SYSTEM FOR NON-EEA NATIONALS

For the purposes of this response we have only set out what the concerns are with the

current immigration categories if they were to apply to EEA workers.

The PBS needs to be viewed in the context of the economic climate at the time of its

introduction. Launching the new system in February 2008, the then Home Secretary Jacqui

Smith MP stated:

‘The introduction of our Australian-style points based system will ensure that only those with

skills the country needs can come. Migrants benefit this country economically, contributing an

estimated £6bn to our national output, as well as socially and culturally, and it is right that we

have a system which is fair but firm, accessible but controlled.’

Whilst we appreciate that since its introduction it has gone through some reform, it is

questionable whether the UK post Brexit would necessitate an immigration system that

requires the same degree of restrictions and control as that imposed by the PBS.

Tier 2 Whilst Tier 2 works in general, the category is not without its issues:

many businesses are not in a position to obtain a sponsor licence

citing reasons such as the prohibitive costs; the speed of the

process; the difficulty in offering remuneration that meets the Tier 2

requirements; and the lack of internal resources to support the

licence once obtained. Such businesses will often rely on EEA

nationals to fill the skills gap. In addition, Tier 2 does not deal with

the need for low/medium skilled labour. Many sectors within the UK

are reliant on the flow of low/medium skilled labour from the EEA to

fill vacancies. The category also has a cap on Tier 2 visas and

simply removing or increasing this for EEA workers will not address

the above issues. The solution therefore should not be to simply fit

EEA workers into the current Tier 2 system.

Tier 1 We were unable to source any quantifiable data with regards to highly valued EEA migrants

who either bring their innovative ideas, invest in or set-up businesses in the UK. Such EEA

nationals are currently able to reside in the UK by demonstrating their self-sufficiency or self-

employment.

Fitting such individuals into the current Tier 1 system will not be workable for the following

reasons:

The Tier 1 Investor category requires a minimum of £2 million and investment is

restricted. It is likely that forcing EEA nationals to come under the current route will deter

those who may ordinarily have invested in the UK.

The Tier 1 Entrepreneur category is effectively broken and the Government is yet to

implement the MAC’s recommendations made in 2015. Non-EEA nationals are already

deterred from applying under this category; forcing EEA nationals into an already

broken route will prevent those who have the best ideas from bringing them to the UK.

‘We need an

unrestricted route

for EEA Tech talent

to work in the UK,

separate from the

Tier 2 system

which is so

cumbersome’ Founder of tech

company

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‘I came to the UK to study, after I completed my studies I stayed in the UK and set up

my business here. I now employ over 100 people, other UK companies rely on my

business. We have a distribution warehouse outside of London which employs many

British workers; we are considering shifting the warehouse to Poland’ EU entrepreneur

The Tier 1 Exceptional Talent category limits individuals to five designated bodies and is yet

to be fully utilised. This is because the requirements are stringent and some of the

designated bodies still do not have the resources to deal with applications.

In its Global Talent report entitled ‘Why the UK’s world-leading creative industries need

international workers and how to attract them’ The Creative Industries Federation (CIF)

stated that the Tier 1 Exceptional Talent category:

‘does not address the sector’s requirements around the freelance workforce or skilled – short

of ‘exceptional’ – talent at the level that many creative businesses would be looking to

employ. With the combined total of exceptional talent visas across all five strands capped at

1,000 places per annum and an annual allocation of only 250 for arts, it operates on far too

small a scale.’

Given that 47% of creative roles are on a freelance basis, CIF proposes introducing a

‘freelance creative visa’.

Tier 3 - Low/medium skilled migration As stated above, the current Tier 2 system does not allow

for low/medium skilled migration (with a few limited

exceptions). Therefore businesses that require such skills

often rely on the domestic/EEA pool.

From those surveyed just under 50% reported that the

majority of their EEA national workforce was made up of

low/medium skilled workers. Therefore these businesses

would need other immigration routes introduced/changed

to allow them to operate effectively, a statement which is

supported by over 75% of our respondents.

When the PBS was first designed provision was made for

lower skilled migrants to be categorised under Tier 3. The

category was never made operational as the Government

of the time felt that the readily available pool of workers

from the EEA would fill these roles.

One solution would be to make Tier 3 operational for EEA

low/medium skilled migrants. However, further consultation

will be required before taking this step in order to fully

understand whether this will address the needs of UK

businesses.

‘Allow those with lower skills to come with ease to the

UK to work and help combat the shortfall of the UK workforce who are unwilling to do

these jobs’ Survey respondent

50% Almost

responded that the majority

of their EEA national

workforce comprises low/medium skilled workers

demand new

immigration routes

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Tier 5 Youth mobility This route allows certain nationals aged between 18-30 to live and work in the UK for up to two years. The route allows visa holders to temporarily gain employment. Businesses are also able to benefit from the supply of labour such migrants provide.

Penningtons Manches envisages a similar system which would allow EEA nationals aged 18-30 to live and work in the UK.

Tier 4 students This route is only available to those coming to study at institutions that hold a sponsor licence. There are restrictions in place as to the type and level of course they can study and the duration of studies in the UK. Furthermore students coming under this route also need to meet the stringent maintenance requirements.

According to Universities UK’s Higher Education in Facts and Figures 2017 report, EEA nationals make up a substantial number of home students. In the Higher Education sector, EEA students make up approximately 41% of all international students (127,435 students). In the Independent School sector the latest census conducted by the Independent Schools Council showed that “there are currently 23,192 non-British pupils whose parents live in the UK. Among these pupils over 42% come from EEA” (ISC Census and Annual Report 2017).

Therefore, forcing them into the PBS will discourage those students from choosing the UK and risks further diminishing the UK’s status as a world-leading education provider.

For EEA students we again envisage a system which will allow them to continue to come to the UK to study.

‘Any restriction on the free movement of our European students (approximately 65% of the student body) will decimate us’ Education provider

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SUMMARY OF SURVEY RESULTS

There was a broad regional spread of respondents to our survey with the majority having

operations in London and the South East. Respondents were of varying sizes and turnover,

from the very small (less than £632,000) to the very large (over £25 million) and with varying

degrees of reliance on EEA nationals.

We are not in a position to answer all the questions posed in the Call for Evidence. We

therefore address the questions that were most relevant to our clients below:

EEA migration trends

Just under 95% of those who responded to our

survey stated that an end of free movement would

have either an impact or a negative impact on their

organisation with the overwhelming majority (76%)

stating that it will have a negative impact.

Of those surveyed, just under 40% have reported a

loss of EEA staff members following the referendum

result and just under 50% have reported a decrease

in applications from EEA nationals.

The general commentary from respondents highlighted the uncertainty as to the EEA

nationals’ future in the UK as a reason for this decrease.

On confidence of businesses being able to fulfill their hiring needs post Brexit, just under 80%

either said ‘No’ or ‘Don’t know’. With regards to the ‘Don’t know’, it is presumed that this is a

result of not knowing what a future system would be.

Given that uncertainty is the main reason behind this trend, the impact on current workforce

and future recruitment is likely to continue until the rights of resident EEA nationals are

formally guaranteed and a workable system is put in place for those looking to enter the UK

post Brexit.

‘There is increased level of

uncertainty among members of staff

and this affects our organisation’s

ability to hire and retain staff in the

UK.’ Survey respondent

‘Current EEA staff have left to return

to their home countries as they have

felt unwelcome or uncertain of the

future’ Survey respondent

believe an end to

free movement

will have a negative impact

76%

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Recruitment practices, training & skills Of those who responded to our survey just over 50% listed skills

including language ability as one of the advantages of employing

EEA workers, with just under 20% highlighting the availability of a

wider talent pool as the advantage and nearly 15% highlighting

diversity as one of the main advantages.

One respondent commenting on the advantages of EEA nationals

stated:

As we have stated above, the current Tier 2 system does not deal with the need for

low/medium skilled labour. These types of jobs are often low paid and temporary in nature.

To introduce a complex, time consuming system for such workers would be nonsensical.

Companies are already reporting that they are seeing fewer applications from EEA nationals

and the quality of those applying has also decreased. Introducing a cumbersome

bureaucratic system would make the UK even less attractive to EEA nationals who may

instead choose to go to our competitors.

“We believe that EEA nationals should remain outside the PBS in order to continue to

provide an agile work force with minimum administrative burden and advocate control

through systems such as worker registration”. Medium sized business

Of the clear conclusions from its Policy report entitled ‘Facing the future: tackling post-Brexit

labour and skills shortages’ CIPD highlighted that:

“the two most important concern the need for a safety net for recruiting unskilled or low-

skilled workers from overseas to ease labour shortages, and an immigration system that

works for them. Without these two provisions, some of Britain’s key industries and services,

including food and drink manufacturing, hospitality and social care, are likely to sustain

considerable damage.”

50% list skills

as an

advantage of

employing EEA workers

‘Gives us access to a broader talent pool as there

are insufficient UK workers with the right levels of

skill we need to sustain and grow our business. We

also need language capabilities to support our

customers’

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FUTURE SYSTEM

One of the biggest challenges facing businesses is uncertainty over the future and so their

inability to plan ahead. They are facing skills shortages, a weak pound, loss of EEA migrant

employees and a decrease in applications from EEA nationals. Therefore the UK quickly

needs to introduce a system which doesn’t further deter EEA nationals from coming to the

country and which prevents the further drain of EEA nationals already in the UK.

By 2019 it is unlikely that the Government will be in a position to present an immigration

system that will address the needs of the various sectors, regions and/or skill level in the UK.

Any new system however needs to be thought through and tested. Therefore, at least in the

short term, we would suggest that a single simplified system which applies to all EEA

nationals be put in place which can in due course be reviewed and further amended to suit

the needs of the UK economy.

The system we are proposing is a registration system which would provide businesses with

the certainty they need and the Government with the necessary data to implement a more

measured system in the future. We propose that the registration system should be for a

minimum of three years following the transitional period.

The registration system would run similar to that of the Accession Worker Registration

Scheme introduced in the UK when Bulgaria and Romania joined the EU. That scheme was

not without its problems, it was ineffective as there was no incentive for workers to register

given that this can be done after the employment started and it was also time consuming.

Instead, the registration system that is put in place needs to be:

Streamlined

Electronic and secure – similar to the electronic visa waiver (EVW)

Allows businesses to quickly fill vacancies; and

Be devoid of bureaucracy.

The scheme will also need to cover all aspects of entry and stay in the UK. EEA nationals

and their dependents entering the UK, for reasons other than visit, will need to register prior

to their entry using the electronic system and providing supporting documents as follows:

Workers – application for registration will need to be supported by a job offer in the UK

which includes details of salary (above the minimum earnings threshold); duration and

skill level. This will enable the Government to capture valuable data as to where skills

‘Create certainty and clarity as soon

as possible, make it as easy as

possible to attract and hire high

skilled international staff’ Survey respondent

‘Should be streamlined and

simplified to make it easier to recruit.

Companies will not be able to just

rely on the UK labour market the skill

set and experience is not always

available.’ Survey respondent from creative industries

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gaps exist. Those switching employers will need to notify UKVI of the change of

employer giving confirmation from the new employer of the job title, salary and skill

level.

Skilled individuals/self-employed – application for registration will need to be

supported by evidence of qualifications and they need to fall into one of pre-specified

sectors which can be set by the Government according to demand.

Investors – confirmation of self-sufficiency ie savings above that required to claim

means tested benefits.

Entrepreneurs/innovators – application for registration will need to be supported by

one or more letters from an organisation in the UK confirming willingness to invest in a

business idea e.g. FCA registered venture capitalists, Government departments, DIT

endorsed entrepreneurial seed funding competitions, or third party sponsor

organisations pre-approved by UKVI.

Students – application for registration will need to be supported by evidence of

acceptance on course of studies at a genuine educational institution and sufficient

funds. There should not be an English language requirement.

Youth mobility – application for registration for EEA nationals aged between 18-30

allowing them to live and work in the UK for a limited period akin to the Tier 5 Youth

Mobility scheme.

The registration scheme will prohibit recourse to public funds and specify duration of stay

according to the relevant category selected. This will also specify if the relevant category

leads to settlement.

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CONCLUSION

As stated above, we have not suggested a registration scheme indefinitely. However having

taken soundings from both our clients and survey respondents, it is clear that the issues of

most concern to businesses are their ability to fill skills gaps and access a wide pool of talent

now and in the future to remain competitive. Given that UK businesses rely heavily on access

to EEA workers to fill vacancies and skills shortages, it is crucial that those businesses are

allowed time to adjust. In addition, the Government needs to ensure that the UK remains

competitive and attractive to EEA students and to high valued migrants so they don’t take

their innovative ideas and investments elsewhere.

Businesses and sectors need to continue to upskill UK workers, the education system and

apprenticeship schemes also have a role to play in continuing to develop homegrown talent.

However, in the short to medium term this will not be enough.

A registration system will allow the Government the opportunity to assess the needs of

businesses and sectors, paving the way for a future overhaul of the UK immigration system

supported by the necessary data. Until then, the Government should abandon its target of

reducing net migration as this would be to the detriment of the economy.

FOR FURTHER INFORMATION

PAT SAINI

T: +44 (0)20 7457 3117

E: pat.saini@penningtons.co.uk

HAZAR EL-CHAMAA

T: +44 (0)20 7457 3194

E: hazar.el-chamaa@penningtons.co.uk

PENNY EVANS

T: +44 (0)20 7457 3195

E: penny.evans@penningtons.co.uk

© Penningtons Manches LLP, 2017

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APPENDIX: SURVEY QUESTIONS

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Brexit impact survey: EEA-workers in the UK labour market About your organisation

1 What was the approximate UK turnover of your organisation in the last financial year?

a. Less than £632,000

b. £632,000 - £10.2m

c. £10.2m - £25m

d. More than £25m

2 Which of the following sectors best describes your organisation's main business focus?

a. Accommodation and Food Service Activities (includes hospitality)

b. Activities of extraterritorial organisations and bodies

c. Activities of households as employers; production activities of household for

own use

d. Administrative and Support Service Activities

e. Agriculture, Forestry and Fishing

f. Arts, Entertainment and Recreation

g. Construction

h. Education

i. Electricity, gas, steam and air conditioning supply

j. Financial and Insurance Activities

k. Human Health and Social Work Activities

l. Information and Communications (includes digital tech)

m. Manufacturing

n. Mining and Quarrying

o. Public Admin and defence; compulsory social security

p. Professional, Scientific and Technical Activities

q. Real Estate Activities

r. Transportation and Storage

s. Water supply; sewerage, waste management and remediation activities

t. Wholesale and retail trade; repair of motor vehicles and motorcycles

3 In which of the following UK regions does your business operate?

a. East of England

b. East Midlands

c. London

d. North East & Cumbria

e. Northern Ireland

f. North West

g. Scotland

h. South East

i. South West

j. Wales

k. West Midlands

l. Yorkshire & the Humber

About your workforce

4 How many workers does your organisation have in the UK?

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a. Less than 10

b. 11-50

c. 51-250

d. More than 250

5 What is the employment status of the majority of your UK workforce?

a. Employed

b. Self-employed

c. Don’t know

6 What percentage of your UK workforce are EEA nationals (excluding Irish nationals)?

a. Less than 10%

b. 10-25%

c. 26-50%

d. 51-75%

e. More than 75%

f. Don’t know

7 What is the employment status of the majority of the EEA nationals in your UK

workforce?

a. Employed

b. Self-employed

c. Don’t know

8 Does your organisation perceive any advantages or disadvantages to employing EEA

nationals in the UK?

a. Advantages

b. Disadvantages

9 Which of the following groups constitutes the majority of your UK-national workforce in

the UK?

a. Highly skilled - (RQF level 6 - graduate level) e.g. senior officials in an

organisation, professionals such as lawyers, accountants, architects,

engineers, IT professionals

b. Medium skilled – (RQF level 3 and 4) e.g. managers in warehouses or

hospitality industry, garage manager, electricians, engineering and IT

technicians, police or fire service officers, plumbers, secretaries, chefs,

florists, air/rail travel assistants, manager level in health care centre,

medical/dental technicians, IT operation technicians, artist, designers, buyers,

career adviser

c. Low skilled – (RQF level 2 or below) e.g. Education welfare officer, credit

controllers, book-keepers, bank and post office clerks, insurance clerks,

administration/facilities supervisors, medical/school secretaries, receptionist,

carpenters, plasterers, painters, floorer/titles, cooks, ambulance assistants,

travel agents, beauticians/hairdresser, caretakers, customer adviser, security

guards

10 Which of the following groups constitutes the majority of your EEA migrant workforce in

the UK?

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a. Highly skilled - (RQF level 6 - graduate level) e.g. senior officials in an

organisation, professionals such as lawyers, accountants, architects,

engineers, IT professionals

b. Medium skilled – (RQF level 3 and 4) e.g. managers in warehouses or

hospitality industry, garage manager, electricians, engineering and IT

technicians, police or fire service officers, plumbers, secretaries, chefs,

florists, air/rail travel assistants, manager level in health care centre,

medical/dental technicians, IT operation technicians, artist, designers, buyers,

career adviser

c. Low skilled – (RQF level 2 or below) e.g. Education welfare officer, credit

controllers, book-keepers, bank and post office clerks, insurance clerks,

administration/facilities supervisors, medical/school secretaries, receptionist,

carpenters, plasterers, painters, floorer/titles, cooks, ambulance assistants,

travel agents, beauticians/hairdresser, caretakers, customer adviser, security

guards

Impact of Brexit

11 Which of the following statements best reflects the impact that an end to free

movement would have on your organisation in the UK?

a. It would have a negative impact on the business and we would need other

immigration routes introduced or changed to allow us to operate effectively.

b. It would have an impact but we would hope to fill the shortfall via the current

UK immigration routes.

c. It would have no real impact as we would expect to fill the gaps from the

domestic labour force.

12 Since the referendum, which of the following statements apply to your organisation's

ability to hire and retain staff in the UK?

a. There has been a loss of EEA staff

b. There has been a decrease in applications received from EEA nationals

c. There is a greater need to sponsor non-EEA workers

d. Projects are being outsourced overseas

e. None of the above

13 Are you confident that your organisation will be able to continue to meet its hiring

needs in the UK following Brexit?

a. Yes

b. No

c. Don’t know

14 Are there any future recommendations for the UK immigration system that you would

like to put forward which would enable your organisation to continue to function post-

Brexit?

About you

15 Contact details (optional)