Contracting, IR35, Brexit, Boris… What you need to know
If you were to take one look at the British media over the last few months; Brexit and Boris Johnson have been front and center of all news coverage. Whilst his announcement as the new Conservative leader, and thus Prime Minister wouldn’t have shocked anyone in politics or the country for that matter, his approach to Brexit has been significantly different when compared to his predecessor, Teresa May.
A high energy and positive about-turn to securing a deal is the default government position but, as of writing, a No Deal Brexit appears to be more likely as internal politics take over Westminster. Whilst all scenarios are still to play out, a deal, no deal, a possible election campaign or even an extension, businesses and contractors remain in limbo about potential work and contract situations.
Contractor organisations have already expressed several concerns affecting the industry in an open letter during the leadership campaign accusing successive Conservative governments of engaging in a “War on Contractors”.
How will Brexit and Boris Johnson affect the contracting landscape? Here are some possible scenarios to consider.
Brexit has caused a level of market uncertainty and for contractors it is still unclear how much they will be affected. The current sticking point is that businesses don’t know what Brexit means; whether there is still access to the single market or if there is a clear cut away from all trade and market relationships. What also needs to be considered is the impact on trade in tariffs on goods and services.
The self-employed market contributed £271 billion to the economy in 2017; a figure which clearly demonstrates the importance of the industry in the UK - whilst there is market uncertainty, freelancers and contractors make a significant contribution to the economy - their role will unlikely be reduced for businesses moving forwards.
Working in Europe
One of the other key considerations to make is how contractors will work across the EU after Brexit. Currently, Freedom of Movement has allowed workers from the UK to work and reside in European countries without requiring a visa. The home office has announced that once the UK leaves the EU, Freedom of Movement will cease with the only major caveat being that should a deal be struck, there is a transition period for two years where FOM will still apply until December 2020.
With 45,000 UK contractors working in mainland Europe and still paying taxes in the UK, one of the major impacts will be down to a potential slow down in the job market. Businesses across the EU will be able to hire from other EU countries more easily, reducing the opportunities available to UK contractors as a result.
Much has been made of the IR35 law which sees a contractor as an employee in all but name. Setup in 2000 under the Blair administration, its impact in the public sector has seen many jobs move to the private sector and new chancellor Sajid Javid, has publicly criticised the tax code calling it “silly” and promised to abolish it.
In recent surveys held with contractors, “57% said they would leave the UK when IR35 reform is enforced in the private sector” and “19% would head abroad in under a year, while a further 12% see themselves going in twelve months or more.”
Brexit preparations by major banking and IT institutions has already seen an upsurge in contractors moving away from the UK and in turn, taking British speaking contractors with them. Reuters reported early in 2019, “Brexit will slowly undermine London’s position. Global banks have already reorganised some operations ahead of Britain’s departure from the European Union, due on March 29.” As we know, this date has now been moved to October 31st.
Without guarantees to pause the introduction of IR35 into the private sector for some time - as requested by industry leaders, and the potential impact of Brexit moving jobs away from London - contractors will need to make decisions on both their employment status and where they are going to choose to work.
It is then no surprise that between market uncertainty and limited movement without requiring visas, hiring contractors is going to face some difficulty with Brexit talks still ongoing.
Investment into the workforce coupled with the regulatory changes will give employers the most to think about in the coming months and transition into post-Brexit UK. From eliminating contracted requirements and turning them into full-time positions to dealing with their UK arms having to move to EU centered competitive landscapes, hiring contractors has become a big question mark for some businesses that need to operate with cost and facilitation in mind.
Countries like Ireland which have big tech employers such as Google, Apple and Amazon will seek contractors who can move freely into the country for periods of time whilst car manufacturers such as Toyota, Honda and Nissan may have to move operations to render themselves more competitive in a just-in-time production scale leading to the potential loss of jobs in the UK.
The type of agreement
What this all boils down to is what agreement can be struck between Boris Johnson, the EU and what can be passed through parliament.
A No Deal Brexit will have more immediate impacts on the economy with “significant implications on the movements of both people and services, which would affect contractors and freelancers working in the UK and Europe.”
Contractors and freelancers could face the first round of budget cuts in this instance as many businesses will look to shore up costs and understand how to operate with any kinds of restrictions that will be imposed in this eventuality. Lets not forget that a No Deal Brexit will make the UK the only nation without any trade agreements in the world and would therefore result in years of tariff based trading impacting some sectors more than others, including some of the service sectors.
A Brexit deal will be subject to a transition period where changes are minimal in that period and dependent upon the outcome of the future relationship negotiations, could result for some opportunities for contractors that may not have been as present as under the current relationship with the EU.
Ultimately the uncertainty of Brexit and the moves made by Boris Johnson and his cabinet in the coming weeks and months will have a major role for the UK economy some of which is harder to predict for certain sectors. Whilst there is no denying the potential negative aspects of Brexit, there still remains opportunities and for contractors moving into 2020 and beyond.
UK based contractors will still have opportunities, and if government promises are kept about taxation laws being paused or scrapped altogether such as IR35 into the private sector, contractors will likely continue to have further opportunities brought their way, especially in a Brexit-deal scenario.