Official figures from the recently released Insolvency Service report shows a 19% rise in UK company insolvencies, the highest quarterly level in more than four years.

The report has revealed that the number of companies becoming insolvent grew at the highest rate since 2009 during the third quarter of 2018. The construction sector has been most impacted, as 2924 construction companies were recorded insolvent in the 12 months leading to the end of quarter three, followed by the wholesale and retail trade as the second most impacted sector.

Commenting on the last Budget before Brexit, Rick Smith, Managing Director at Forbes Burton, said: “One of the key causes of insolvencies is the pressure being put on businesses in the run-up to Brexit. Some of the Chancellor’s pledges are good news for smaller high street retailers, but the main issue is that business rates overall are still too high – and there really needs to be some sort of wholesale reform to turn the high street around.

“The new digital services tax announced in the latest Budget will probably not help the high street directly as it only applies to businesses that have £500 million turnover. However, it does go some way towards levelling the playing field.

“It’s a small step in the right direction but these measures will need to go further to have any major effect.”

With the countdown to Brexit day now on, and unease being felt across the country as a clear exit plan is yet to be devised, Forbes Burton is urging businesses to address any gaps in their knowledge in these uncertain times.

Rick added: “At the minute all fingers point to the likelihood of a no-deal Brexit which will inevitably impact the UK economy for some time. Our advice to companies would be to avoid any risks, cut controllable costs and to keep an eye on the competition.

“Ahead of the Brexit decision it’s likely that costs will increase for businesses reliant on import/export trade, so it’s advisable to ensure there is a healthy kitty to aid cash flow for VAT changes and additional stock. Also, access to EU business grants will likely cease, causing some disruption as businesses seek an alternative source of funding.

“Employment is also likely to be hit hard as businesses will need to review the immigration status of employees. Brexit isn’t going away – and preparation is essential.”

For over 30 years Forbes Burton, based in Grimsby, has been helping companies with financial difficulties and insolvency issues. The company is committed to a rescue and recovery culture where possible and is well practised at guiding companies through financial hazards.

Free movement of EU workers has been the cornerstone of UK-EU relations for many years. Below Lawyer Monthly hears from Rahul Batra at Hudson McKenzie on the potential future of low skilled worker in a post-Brexit world.

Several hundred thousand low-skilled workers from EU countries are employed each year in jobs predominantly in cleaning, hospitality and the agricultural sector which has historically witnessed a strong reliance on seasonal workers from EU countries. For example, the seasonal agricultural workers scheme (SAWS) was in place for a very long time prior to ending in the year 2013, mainly due to the fact that EU workers were already allowed to come to the UK under free movement.

However, to throw a spanner in the works, the UK government has announced that in line with Brexit, free movement of EU workers will come to an end in the year 2021. This raises two important questions- How are UK businesses engaged in the above sectors going to survive by not having easy access to EU workers? And will there be a replacement scheme in effect?

In order to facilitate migration into jobs that are not considered sufficiently skilled to qualify for Tier 2 work permits, the government may be looking at the below two options.

Youth Mobility Scheme (YMS)

In the July 2018 White Paper, the government stated that it hopes to negotiate a UK-EU ‘Youth Mobility’ scheme modelled on the existing Tier 5 scheme that would allow some sort of low-skilled work permits to be introduced post Brexit. Tier 5 YMS is a scheme which at present allows citizens of few common wealth countries including Australia, New Zealand, Canada to be employed in jobs at any skill level.

Is Youth Mobility Scheme the answer?

The Youth Mobility Scheme has been historically designed to facilitate cultural exchange between the UK and certain common wealth countries, and not as a labour migration programme. By its very nature, this scheme is temporary while a majority of EU workers would stay for more than two years, and often remain with the same employer for many years. Moreover, YMS has an age restriction of between 18-30 years and not all EU workers would fit into this age bracket, although the hospitality industry relies heavily on young workers, but others may not. Finally, the YMS has caps for each participating country and the size of any caps would be important in determining whether YMS is a major source of labour migration in the future.

Work Permits for low-skilled jobs

Work permits by their very nature, involve relatively detailed regulation of the types of jobs that are eligible and the conditions of work and also require employer sponsorship linking workers to specific jobs. The Points Based System (PBS) which has five tiers, hasn’t been used completely since inception. The current Tier 2 visa system for non-EU nationals is designed mainly for graduate level jobs. Most employee jobs in the UK labour market do not meet this criterion, and a substantial share of migration into these non-graduate positions has been from EU countries. The Tier 3 of the PBS, which was original designed to accommodate low skilled workers was never put to use. Therefore, this may be a perfect opportunity for the government to introduce work permits arrangements for low skilled workers under Tier 3 scheme.

However, work permits are not devoid of drawbacks. Firstly, several employers view sponsorship as a cumbersome burden due to the high costs and administrative burden involved. Moreover, the fact that a worker is tied to a specific job, makes it harder for workers to leave exploitative employers in cases where the terms of participation in the scheme have not been successfully enforced.

Conclusion

Are we therefore going to have a Youth Mobility Scheme for EU workers or a new work permit scheme under Tier 3 of the PBS post Brexit, in order to meet the demand for migrant workers in low-skilled jobs? If not, it is very likely that the government will introduce at least some equivalent schemes for labour migration in low skilled jobs after free movement comes to an end, lest the risk of illegal employment rises due to employers not having sufficient legal options to recruit migrant workers in such jobs.

If the Government wants to use migration to fill unattractive jobs after Brexit, preventing exploitation will be a major challenge, according to a new report by the Migration Observatory at the University of Oxford.

The report Exploiting the opportunity? Low-skilled work migration after Brexit considers the Government’s options for providing low-skilled migrant labour in the UK when freedom of movement comes to an end after the post-Brexit transition period. It argues that the two main options—an expanded youth mobility scheme and a work-permit system that channels workers into specific, low-wage jobs such as farm work or social care — are likely to bring significant costs as well as benefits.

Youth mobility schemes—which the Government has already said it wants to expand to EU nationals—are designed to promote cultural exchange and are attractive to workers because they offer the right to move between jobs. However, they are not always well suited to channelling workers towards less cosmopolitan locations or roles where employers struggle to attract British workers, such as fruit picking or meat processing.

Employer sponsored visas for low-skilled workers enable government to target specific jobs where migrant labour is thought to be needed, but they also have important drawbacks. These schemes tie workers to their employers, which may increase the risk that unscrupulous businesses will exploit vulnerable workers. While this can be overcome by regulating the wages and conditions employers must offer, the rules must be enforced – a significant challenge, especially if the schemes admit a large number of workers.

Employer sponsorship schemes are also, often, considered complex and burdensome by employers – particularly small and medium sized companies.

Madeleine Sumption, Director of The Migration Observatory at the University of Oxford said: “The two most likely ways that future demands for low-skilled labour could be met after Brexit are youth mobility and employer sponsored visas. There’s no guarantee that youth mobility can provide staff for unpalatable roles in out-of-the-way places. That’s because the scheme gives workers lots of options, and people with options often prefer to work in shops and bars rather than muddy fields or food processing plants.

“Employer-sponsored visas give government more control over the work that migrants do, but making sure the visas don’t facilitate abuse is a real challenge. If workers can’t leave a bad job, there’s more responsibility on government to prevent exploitation. In theory this should be possible with careful monitoring and oversight, but enforcing labour standards is not an area where the UK has the best track record.”

The report notes that there is no consensus about whether or how much migration is needed into low-skilled jobs after Brexit at all.

Sumption added: “There’s no objective, evidence-based way to decide exactly how much low-skilled migration the UK ought to have after Brexit. It’s even more difficult to decide which industries should have access to migrant workers and which shouldn’t – but with work permit schemes a fair amount of central planning is unavoidable.”

(Source: University of Oxford)

In this insightful article, Laura Tainsh, Lead Partner in the Environmental & Waste Team at Davidson Chalmers LLP, Globalaw, and Sean G. Herman, Environmental Attorney, Hanson Bridgett LLP, Globalaw, speak on what laws need to change in order for people to seriously address environmental concerns.

There has been a perceptible shift in the way that environmental issues generally are considered by the wider public over the last year, mostly as a result of the increased attention by mainstream media on issues such as plastic pollution in the marine environment. That shift has brought existing environmental law into sharp focus and may now become a force for change in the way that environmental issues are regulated, at least in the developed world. Whilst meaningful change takes time to bring about and implement, recent events have provided evidence of movement in both the political and regulatory spheres in both the UK and United States. In this article, we examine the forces behind these changes that will impact businesses operating in these jurisdictions.

Many feel that the white paper does not go far enough and leaves too many matters requiring clarification post-Brexit. This likely would include amending or creating new environmental legislation, a big task to wait until post-Brexit to address.

Brexit Remains Evergreen in the UK

From a UK perspective, the most obvious, topical and current example of both the need and the opportunity for change are the ongoing negotiations relating to Brexit which will, to some extent, determine how environmental concerns are regulated in the immediate future.

In early July, the UK Government published its highly anticipated white paper stating its negotiation position on Brexit[1]. After fairly considerable pressure from a number of those in the private, political and public sectors, the white paper includes a commitment to strong environmental protections, starting with the retention of all existing environmental standards imposed under EU law. However, many feel that the white paper does not go far enough and leaves too many matters requiring clarification post-Brexit. This likely would include amending or creating new environmental legislation, a big task to wait until post-Brexit to address. In order to ensure that various existing environmental concerns are properly addressed, all of the following points will need to be further considered and clarified in due course:

EU targets

The UK is currently breaching a number of targets set by the EU in areas such as waste, water and air quality. Whether these breaches will be resolved or effectively dismissed has not yet been clarified.

EU case law

The extent to which the UK will have regard to the remit and decisions of the European Court of Justice going forward is unclear. Environmentalists argue that these decisions are essential to the continuing development of environmental law in the UK.

Energy and Climate Change 

How the UK will participate in the energy market post-Brexit has yet to be clarified. This includes whether the UK will leave the Internal Energy Market and how the UK’s technical rules for trading will compare to the EU Emissions Trading System (if indeed different). However, it is worth noting that the UK’s domestic legislative targets on climate change are more ambitious than required under EU law, meaning they are unlikely to change post-Brexit.

In both the UK and US, there is a fundamental need for legal clarity to provide the common ground needed to bring both the regulated community and environmentalists together to allow change.

Circular Economy

The EU officially published its circular economy package, with changes to directives on waste, packaging, landfill and WEEE, in June this year. Despite its impending exit from the EU, the UK has indicated that the measures required under the package will be adopted under domestic law, as there is substantial support across a number of sectors throughout the UK for closed loop and circular procedures to be utilised in relation to the management of natural resources.

Trade

In order to facilitate a continued trading relationship, the UK will need to ensure that with respect to certain goods - such as those which are heavily regulated, including chemicals, electronic equipment and agri-food products -, common environmental rules applicable in the EU are adhered to.

Notwithstanding the important interaction between the UK and the EU on environmental matters post-Brexit, the UK has expressed its commitment to upholding the obligations imposed under the many international agreements to which it is a party. That perhaps does go some way towards satisfying the wider global environmental concerns of domestic citizens, but it is arguable that more specific regulatory action, including both taxes and incentives, as appropriate, will be needed to make government bodies, business and individuals alike directly responsible for their actions.

From the US' perspective, two of the main environmental statutes, the Clean Water and Clean Air Acts, are nearly 50 years out of date.

Shifting Ground in the US

From the US' perspective, two of the main environmental statutes, the Clean Water and Clean Air Acts, are nearly 50 years out of date. Scientific progress since their enactment has widened gaps between our understanding of the environment and the statutes' original textual meaning. Until now, executive agencies have filled these gaps by relying upon regulations. However, as recent failures in water quality and greenhouse gas regulations demonstrate, this approach has shortcomings that demand Congressional action.

The Clean Water Rule

Since 1972, executive agencies have relied upon developments in hydrology to expand the scope of how they enforce the Clean Water Act. This came to a head at the Supreme Court in the 2006 case Rapanos v. United States in which a developer challenged a regulation of certain wetlands. Supreme Court Justice Anthony Kennedy argued that the Clean Water Act may be expanded to regulate waters with a proven "significant nexus" to navigable waters. However, the four conservative justices criticised this approach, forcefully arguing that the original textual meaning of the Act provided no basis for such an expansive interpretation.

The Obama Administration seized upon Justice Kennedy's "significant nexus" test and proposed the Clean Water Rule: a regulation that clarified and expanded the scope of federally regulated waters. The regulated community immediately challenged the regulation by arguing, in part, that it exceeded the Clean Water Act's textual authority. Once in office, President Trump's Administration began repealing the Clean Water Rule under the rationale that regulations must be confined to the statutory text.

The Clean Power Plan

Similarly, executive agencies have relied upon recent developments in climate science to identify and regulate pollutants like greenhouse gases. This came to a head at the Supreme Court in the 2007 case Massachusetts v. Environmental Protection Agency. There, a majority of the Court held that these scientific developments compel the EPA to take steps under the Clean Air Act to regulate greenhouse gases. Justice Kennedy joined the majority opinion, the lone conservative justice to do so. In dissent, the remaining conservative justices again argued that, regardless of the practical need to regulate greenhouse gases, the Clean Air Act's text does not provide the authority to force the EPA to do so.

Following the Massachusetts decision, the Obama Administration adopted regulations like the Clean Power Plan to address greenhouse gas emissions. Again, the regulated community challenged the regulation on the basis that it lacked textual authority and, again, the Trump Administration began repealing the Clean Power Plan under that same rationale.

Justice Kennedy's Retirement

The Trump Administration's efforts to limit the reach of federal regulations over businesses took a leap forward when Justice Kennedy recently announced his retirement from the Supreme Court. President Trump nominated Judge Brett Kavanaugh as his replacement, which at the time of this article is still pending confirmation. Judge Kavanaugh is a textualist with demonstrable concern for the growth of executive agencies. Had Judge Kavanaugh been on the Supreme Court instead of Justice Kennedy, the Supreme Court would likely have decided the Rapanos and Massachusetts cases differently. Therefore, the legal bases for environmental regulations like the Clean Water Rule and Clean Power Plan appear lost.

Oscillating between diametrically opposed regulatory approaches breeds uncertainty that is neither good for the environment nor businesses, for whom uncertainty often proves to be very costly.

Proposed Solution: Amend the Environmental Statutes

It seems the US cannot rely upon major regulations to alter the prioritisation of environmental issues. President Trump's election was not only a setback for progressive environmental regulation efforts, but it has now changed the Supreme Court such that it may be decades before we next see major regulations like the Clean Water Rule and Clean Power Plan.

Instead of new regulations, Congress needs to update its ambiguous, half-century old environmental statutes to adequately address modern environmental concerns. If textualism will define judicial review in the coming decades, environmental regulations must then be better grounded in Congressionally-sanctioned statutes.

Importantly, updating environmental statutes will benefit the regulated community. Ambiguous environmental laws allow for paradigm shifts depending on who is president as demonstrated by the elections of Obama and Trump. Oscillating between diametrically opposed regulatory approaches breeds uncertainty that is neither good for the environment nor businesses, for whom uncertainty often proves to be very costly.

The Need for Clarity

In both the UK and US, there is a fundamental need for legal clarity to provide the common ground needed to bring both the regulated community and environmentalists together to allow change. The role of environmental lawyers in both jurisdictions is at pivotal point. With change of this significance on the horizon, it is vital that lawyers in this field are ahead of the game and aware of political and policy drivers as well as those which are directly based in regulation.

[1] https://www.gov.uk/government/publications/the-future-relationship-between-the-united-kingdom-and-the-european-union

Laura Tainsh

Lead Partner in the Environmental & Waste Team

Davidson Chalmers LLP, Globalaw

Laura Tainsh is the Lead Partner in the Environmental & Waste Team at Davidson Chalmers LLP, a full-service commercial law firm based in Edinburgh, Scotland. Laura is a Chartered Waste Manager with the Chartered Institution of Wastes Management, the only solicitor in Scotland to have obtained this accolade.

Sean G. Herman

Environmental Attorney

Hanson Bridgett LLP, Globalaw.

Sean is an Environmental Attorney with Hanson Bridgett LLP, a full service law firm based in San Francisco, California. Sean represents private and public clients alike, including manufacturers, retailers, farmers, and governmental entities such as counties, water districts, and waste management authorities.

Total EU net migration to the UK has more than halved since the referendum and the estimate of net migration of citizens from Poland and other A8 countries was negative for the first time since the expansion of the EU, latest data from the Office for National Statistics has shown.

A8 net migration to the UK for the year ending March 2018 was estimated at -2,000 per year, though margins of error mean that this number is not statistically different from zero.

There was also a decline in both A2 migration (from Romania and Bulgaria) to 38,000 per year – the lowest level since 2014, when these countries got full access to the UK labour market. Net migration of EU15 migrants – from the older EU member states such as Germany, Italy and Spain – fell from 73,000 in the year to March 2017 to 45,000 in the same period this year.

The fall in net migration includes a fall in net migration of EU15 citizens coming to the UK for a definite job – one of the groups considered most economically beneficial to the UK. In all, EU net migration data shows a decline by more than half from its peak of 189,000 in the year leading up to the referendum, reaching 87,000 in the year to March 2018.

The data in theory show non-EU net migration to be almost three times higher than EU at 235,000 – however the Migration Observatory at the University of Oxford has raised “real doubts” about the accuracy of the non-EU net figures.

Madeleine Sumption, Director of the Migration Observatory at the University of Oxford said: “The UK has clearly become a less attractive country for EU migrants since the referendum. The lower value of the pound means that workers coming here for higher wages are getting less than they were in the past, and economic conditions in many of the key EU countries of origin have improved a lot over the past few years. Uncertainty about the implications of Brexit may have played a role.”

The new figures come at a time of uncertainty for UK migration statistics. The ONS has started a programme of work to improve the quality of the statistics, but these developments are mostly not yet reflected in today’s figures. Significant issues have been identified with measurement of non-EU student migration but it is not yet clear to what extent problems also exist for other types of migration.

Sumption added: “We have real doubts about the accuracy of the non-EU net migration estimates. Other data sources – like the Labour Force Survey - do not support the idea that non-EU citizens are currently contributing so much to net migration.”

The Migration Observatory has argued for some time that the International Passenger Survey does not deserve the special status that it has acquired in the UK’s political debate, and that by also focussing on other data sources the quality of debate on migration could be improved.

(Source: Migration Observatory)

With Brexit looming, recent promotional activity from the continent is indicating that some of the UK’s £25bn legal industry could be lured overseas. Craig Arnott, Managing Director at Burford Capital, explains the complexities of Brexit and the legal industry below.

In part this is driven by uncertainty surrounding the UK’s jurisdiction in Europe under the Brussels I Regulation. Other European courts have in response begun adopting UK legal practices, offering proceedings in English and opening international courts in an attempt to attract the UK’s lucrative legal trade.

Frankfurt, Paris, Amsterdam and Brussels are all jurisdictions that have received a boost from the Brexit decision, and have begun to make their own legal systems more attractive to the type of litigation that previously would have been pursued in London without a second thought.

This is not all bad news for providers of litigation finance, even those based in the UK, because they can be agnostic about the geography and forum of litigation so long as there is a robust and predictable judicial system.

Further, the shift in dispute resolution work from London to Europe after Brexit is happening for other reasons as well. Costs, or more specifically adverse costs, particularly for competition and class action-style cases with multiple, deep-pocketed corporate defendants are making more and more claimants look to the continent. With international competition intensifying, the UK faces a considerable challenge from the issue of adverse costs exposure.

This is because while it is one thing to not win damages in your case, it is an entirely different matter to have to pay the other side’s costs as well, as it can multiply potential exposure from litigation three, four or five-fold.

The adverse costs risk in the UK commercial courts has far outstripped inflationary increases in the last ten years. In the RBS Rights Issue litigation, RBS’s costs estimate for the liability phase was £90 million, and whilst that is a truly exceptional number, £5 million for the costs of a defendant to trial is by no means unusual.

If you consider a case where there are multiple defendants (either at the claimant’s choice or added in under the Part 20 procedure), the exposure is similarly multiplied, meaning potential adverse costs in a cartel or competition matter could easily hit £20 million.

To remain ahead, London therefore must develop strategies to address costs concerns for would-be claimants – and external financing offers one potential solution. Burford recently announced an offering designed to meet a need in the marketplace for the significant level of adverse costs coverage that is required to protect claimants’ exposure in the UK. To address adverse costs risk in commercial litigation and arbitration, Burford can offer insurance on Burford-funded matters.

Legal finance can offer relief from this extraordinary exposure insofar as a third party assumes the downside risk in the event of a commercial litigation loss. However, it takes a very well capitalised litigation finance business with significant risk tolerance to handle this degree of risk and also provide cover for costs, meaning claimants will have to do their homework before going ahead.

The UK’s legal industry must be a key component to be secured whatever the outcome of negotiations with the European Union. It cannot rest on its laurels and must continue to adopt the changes and innovations necessary to keep British law at the forefront of the legal world. Only in this way can the UK remain at the forefront of the international legal world and continue to attract global litigation and arbitration.

Following the recent UK Construction Purchasing Managers' Index (PMI) figures, Brendan Sharkey, head of construction and real estate at accountancy firm MHA MacIntyre Hudson, says the industry has emerged from Carillion’s collapse relatively unscathed, but is slow waking up to the Brexit threat.

Today’s figures reflect a sector that’s doing well and it has proved resilient over recent months. The truth is that construction has actually done much better than most people expected following the collapse of Carillion. The carnage among second and third tier construction companies, thought to be an inevitable consequence of Carillion’s demise, has failed to materialise to any real extent, although unfortunately there have been casualties.

Below the top tier outsourcing and construction giants there are many well run firms with decent profit margins, reserves to see them through a crisis, and good relationships with the tier one firms. This should give us some degree of confidence for the future. The sector is stronger and has better management than most commentators have given it credit for.

On a less positive note, construction has been relatively slow to wake up to the dangers posed by Brexit. Given the industry doesn’t depend on exports, the potential pitfalls of a no-deal Brexit have perhaps been easier to overlook. Yet construction does depend on the import of raw materials, and crucially on the free movement of labour. Over the next few months we will see more focus on contingency planning and demand for additional information and support from the government.

The consequences of Carillion’s collapse were over-hyped but only a very foolhardy captain of industry can assume the same will be true about the consequences of a no-deal Brexit.

With a vast amount of people working on ensuring things run smoothly, especially when the deal is cross-border and involving multiple jurisdictions and their respective legislations, employment law is often not the first aspect on the team’s mind. Jonathan Carr, Partner at Lewis Silkin LLP, discusses due diligence in employment law, and what companies should consider when investing across the pond.

The key principles of employment due diligence in the UK are no different to most other jurisdictions: check compliance with local rules, benchmark against market norms and risk-assess the likelihood of claims or problems diminishing the target’s value. But the growing breadth and complexity of UK employment law (much of it derived from EU law but here to stay regardless of Brexit) makes employment due diligence on UK targets an increasingly important and skilled task.

A number of key concepts - the right to notice of termination, protection against unfair dismissal and mandatory holiday and rest entitlements - may be unfamiliar to many US clients, particularly those acquiring in the UK for the first time, and therefore need to be carefully explained. The ability to make sweeping changes to personnel and employment terms is more challenging than on the other side of the Atlantic, although generally easier than in continental Europe.

The list of employment factors that have the potential to become show-stopping or price sensitive considerations is also far longer and less obvious than it once was. Despite this, full employment due diligence is rarely requested. More often than not the brief is to focus on ‘red flag’ concerns, highlight material irregularities and identify key areas where pre or post acquisition remedial action may be required.

Much obviously depends on the nature and size of the business to be acquired but most buyers will be looking for reassurance in the same core areas. Is the target generally compliant with employment laws? Does the target own all of the IP created by its workforce? Are there any unusual or onerous employment terms (for instance, enhanced redundancy entitlements or change of control clauses)? What would it cost to terminate some or all of the senior executive team? Are the employees all employed by the target company? Do they have the right to work in the UK? Are there recognised trade unions and is that relationship constructive? Is the target properly protected against unfair competition from departing employees? Is there a latent pension or tax liability?

Answering these standard initial questions will usually give a reasonable indication of whether the HR function is well run and the overall ‘employment health’ of the target. But a good first impression is no guarantee of immunity from problems. In an increasingly complicated world, red flags are not always to be found in the most obvious places. The employment lawyer may need to look beyond ‘hard law’ compliance into matters such as the target’s gender pay gap, attrition rates, supply chain employment practices and the way in which employee data is managed and shared. High growth start-up businesses are often amongst the most vulnerable. Inevitably, compliance with employment laws and the development of a sophisticated HR function lags some way behind the pace of growth and recruitment.

In recent years, the evolution of UK employment law has been characterised by a number of seismic developments, some political, others arising from case law decisions challenging long held orthodox thinking. The common denominator has been the profound effect these developments have had on huge numbers of companies, both large and small, and across a range of industry sectors, increasing their employment costs materially, sullying reputations or even pitching companies into class action style disputes with sizeable chunks of their workforce. Key examples include the re-calculation of holiday pay to include allowances, overtime and commission, equal pay disputes where pay disparities between female and male dominated roles which appear to have very little in common have been put under the microscope, the ethics and abuses of zero hours contracts and perhaps most significantly of all, the trend of self-employed contractors challenging their status and claiming employment or worker rights, particularly in the fast growing gig economy.

No article would be complete these days without mention of Brexit. The impact on employment laws is likely to be negligible, at least in the short term, but our economy’s dependence on EU workers over the last few decades particularly in sectors such as healthcare and construction inevitably means competition for talent and workforce shortages are likely to have a serious impact on some UK companies in the years to come. A critical part of our role working with US law firms on the due diligence of UK targets is looking over the horizon for the next big trends. What may be a successful and highly profitable employment model one minute can quickly unravel with momentous consequences.

Jonathan Carr

Partner

Lewis Silkin LLP

www.lewissilkin.com

I am a partner and specialist employment lawyer with over 20 years’ experience advising on employment law issues.

My practice has a particular emphasis on restructuring, employee relations issues, TUPE/outsourcing, transactional support and senior executive exits. My clients are similarly diverse from law firms and hedge funds to football clubs and retail brands.

Immigration: It is a sensitive topic to say the least. Brexit was half an opportunity to spew negativity towards immigrants with famous quotes, as follows: ‘they are taking all of our jobs!’ and ‘I want my country back!’… like they had lost it in the first place. The more extreme xenophobic comments surfaced from an inbuilt fear that immigrants are never good news; some believe they take our jobs without integrating well into society, disrespect the country by possibly adding to crime rates, abuse the tax system and benefits…(the list of negativity goes on).

And the UK was not the only country subjected to the notion that immigrants bring turmoil packed away at the bottom of their suitcase. President Donald Trump was not shy of expressing his concern over mass immigration from the onset and throughout. Needless to say, his views resulted in some controversial movements and moments, such as the Travel Ban and the Mexican Border Crisis, with a mix of support and horror.

We can take it from both sides; where we need to ensure our home country and its economy does not deteriorate by taking in more people we can manage, we also need to remember the importance of humanity. We also need to take a step back and think of the positives of immigration.

There is constant concern about ‘letting anyone in’, including from terrorists to thugs, but this has tarnished and thrown dirt on the backs of those who genuinely want to embrace a new home, culture and country.

This month, we decided to question on how prejudice against immigration has thus impacted the business immigration movement. What will it mean for thriving businesses if negativity keeps skilled migrant workers away, due to fear or uncertainty of being accepted – will the economy crumble? How will law firms change?

Business Immigration – Yay or Nay?

The uproar of concern can push many people off in immigrating. With the majority of people coming over to the UK because of a job, looking for a job, or to study, it is evident that many have good intentions of contributing to the society they will be surrounded by[1].

But ever since Brexit, immigration has dropped[2], and with nearly 10% of the doctors[3] in the NHS being from the EU, it is undeniable their presence is needed for the UK to flourish. In 2015/16, 11% of those joining the NHS were EU nationals (counting those for whom a nationality was known; whereas in the year ending September 2017 the figure was 8.4%[4]. With rising costs and added pressure, it clear, the NHS relies on immigration to survive, and will struggle without[5].

The news on the NHS is probably nothing new to you, but the chart below also showcases how EU immigrants impact other, vital sectors in the economy.[6]

(Infographic from: CNN Money)

The UK government has been warned about the impact legal and regulatory immigration changes could have on the economy. With immigration plummeting, but vacancies being at a record high, statistics have shown a 12% drop in the number of immigrants a year after the referendum, with politicians and businesses issuing warnings to Ministers on the disastrous effect this may have on the economy[7].

How about the US?

With no doubt about it, Trump is working hard to stick to his promise of Making America Great Again. Love him or hate him, there is no denying he has made some significant impact, especially with North Korea. He states he is dealing with immigration in the way he ‘dealt with North Korea’, for the betterment of America’s economy and its people, and a new survey does reveal that 51% of Americans approve of his handling of the economy’[8].

As aforementioned, Trump’s controversial restrictions were placed to protect US workers; and even though his policies have added around 213,000 jobs to the US economy, unemployment rates have risen by 4%. So we cant help but ask, how has Trump’s policies changed businesses?

Let see how business immigration helps:

An article from Vox stated: “When the University of Chicago’s Booth School surveyed a panel of well-known academic economists, for example, 52% agreed that admitting more low-skilled immigrants to the United States would make the average US citizen better off[9].”

The panel also agreed highly skilled immigrants would be beneficial. In general, immigrants don’t tend to want the same jobs as the nationals, instead, they are usually competing with other immigrants for the same job. Evidence also suggests that when immigration increases labour supply, firms increase investment which reduces capital per worker, therefore keeping average wages from decreasing in the long term[10].

With around 5 million immigrants are working in the US[11], immigrant business founders have grown more important to the economy over time. Daniel Costa, the Director of Immigration Law and Policy Research at the Economic Policy Institute, stated: “Immigrants are overrepresented in a lot of occupations in both low and high-skilled jobs.

"You'd feel an impact and loss in many, many different occupations and industries, from construction and landscape to finance and IT," he explained[12].

Immigrants only make up 13% of the US population, but they contribute to nearly 15% of the country’s economy output, according to a 2014 report from the Economic Policy Institute[13], so a decline in immigration would certainly be felt in more ways than one.

One of Albany’s largest law firms - Whiteman, Osterman and Hanna - even claimed that they have noticed around a 40% increase in 2018 in the number of cases where the government asks for more documentation regarding legal immigration[14], which has not only impacted the legal firms specialising in immigration, but it has also impacted businesses, large and small.

This also goes to show the impact these changes have had on law firms. With immigration policies being amended, employers are having to provide more documents and evidence, as well as dealing with deportation proceedings, meaning law firms such as Whiteman, Osterman and Hanna have seen an increase in immigration matters, leading their firm to appoint more attorneys to expand their firm to deal with the growing work around immigration.

Good news for law firms, however, these administrative changes have slowed down the visa process, where some businesses, especially SMEs, have felt the impact. Some have not had time to apply for H-1B visas which has impacted their business, and the costs [of the visa] have resulted in overall lower salaries throughout their company[15].

But by changing policies and perceptions of [business] immigration has made it harder for foreign workers to stay. Earlier this year in May, the Department of Homeland Security proposed a rule to end an Obama provision that allows certain foreign entrepreneurs to be considered for parole to temporarily go to the US to develop and build their start-up businesses[16]. Immigrants are actually twice as likely to start a business than American-born citizens, and by making it harder for them to do so, can cause severe detriment to its economy.

And even though Trump has been successful in creating work, who will fill the gaps – especially when unemployment is increasing? Immigrants are usually after seasonal jobs, but with perceptions towards immigration changing and changes in visa applications, such as USCIS announcing that non-citizens that are denied their application for a “benefit” - such as an extension or change of status, a green card, or citizenship[17] - could be placed in deportation proceedings, things for the country could change.

It is without doubt that an integrated globe has bettered societies in several different ways. It is a shame that a few bad eggs ruins things make things harder for those who will make a positive impact in their new dream home. And pushing morality and humanity to the side for a second, changes in laws have seen a growing backlog of US immigration cases in court and with it becoming increasingly harder for skilled workers to enter the land of the free, we can only sit and wait to see the impact of these changes to America’s economy and business landscape and more interestingly, its legal sphere.

[1] https://fullfact.org/immigration/eu-migration-and-uk/

[2] https://fullfact.org/immigration/eu-migration-and-uk/

[3] https://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7783#fullreport

[4] https://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7783#fullreport

[5] https://www.politico.eu/article/nhs-chiefs-sound-alarm-about-brexit-impact-on-health-workforce-nurses-doctors-migration/

[6] https://money.cnn.com/2017/10/18/news/economy/brexit-immigration-uk-eu/index.html

[7] https://www.independent.co.uk/news/uk/home-news/brexit-uk-immigration-workers-employment-2018-latest-updates-a8420781.html

[8] https://www.nbcnews.com/think/opinion/has-donald-trump-really-made-america-economically-great-again-ncna886161

[9] https://www.vox.com/policy-and-politics/2018/1/30/16934726/trump-immigration-values-decline

[10] http://budgetmodel.wharton.upenn.edu/issues/2016/1/27/the-effects-of-immigration-on-the-united-states-economy

[11] https://www.cbsnews.com/news/immigrants-impact-on-the-u-s-economy-in-7-charts/

[12] https://abcnews.go.com/US/immigrants-us-economy-disaster-experts/story?id=45533028

[13] https://abcnews.go.com/US/immigrants-us-economy-disaster-experts/story?id=45533028

[14] https://www.bizjournals.com/albany/news/2018/07/26/immigration-changes-under-trump-administration.html

[15] https://www.inc.com/zoe-henry/trump-changes-to-h-1b-impact-entrepreneurs-2018.html

[16] https://www.uscis.gov/humanitarian/humanitarian-parole/dhs-proposes-remove-international-entrepreneur-rule

[17] https://qz.com/1323136/a-uscis-immigration-policy-change-threatens-non-citizens-with-deportation-if-they-lose-status/

In this video, Bird & Bird employment partner Katarina Åhlberg looks at: - The key challenges for businesses considering moving their employees from the UK.

- Can a business require key employees to move?

- Which immigration law issues need to be considered.

- What practical steps should businesses take?

- The importance of a talent pool when considering a move.