Reflections on Brexit
Alex de Ruyter, Director of Research at Birmingham City University's Business School, shares his thoughts on Brexit
Posted by Hannah Oakman | December 22, 2016 | Finance, legal, HR
brexit, alex-de-ruyter, birmingham-city-university, uber, deliveroo, joseph-rowntree-foundation, resolution-foundation, sports-direct, phillip-hammond

By Alex de Ruyter, Director of Research at Birmingham City University’s Business School

During the referendum campaign, one of the key themes articulated by ‘Remain’ campaigners was that a vote to leave the EU was a vote to drastically alter (i.e. reduce) the scope of protective employment regulations in the UK workplace. In response to this, the ‘Leave’ campaign argued that freedom of movement and consequent migration of workers from Central and Eastern European member states was depriving British workers of jobs (and access to school places, doctors’ appointments and social services) and was lowering wages in the economy.

A vote for Leave was a vote to ‘take back control’ of the UK border and reduce immigration. That the vote for Leave was significant in the traditional Labour-voting areas of the old industrial Midlands and North of England and Welsh valleys suggests that arguments around migration and low-paid workers had more traction with voters than any nascent concerns over employment rights.  

Research for the Joseph Rowntree Foundation suggested that workers on low incomes were more likely to support Brexit.

Much work in the UK is low-paid and insecure... more than 7 million workers, or some 22.2% of the workforce in 2016 were in precarious forms of employment

As such, much work in the UK is low-paid and insecure, with analysis by John Philpott for the Resolution Foundation (as reported in the Guardian) suggesting that more than 7 million workers, or some 22.2% of the workforce in 2016 (up from 18.1% in 2006) were in precarious forms of employment (Booth, 2016).

Precarious workers are those who could lose their job at “short or no notice”. This only serves to highlight that for those in precarious forms of work, the platform of employment rights were already minimal - if indeed enforced. This is in a context whereby the average wage for full-time employees (that is, median average salary for the tax year ending 5th April 2015) was only £27,600 (https://www.incometaxcalculator.org.uk/average-salary-uk.php, accessed November 22nd 2016).

Of the 22.2% of the workforce defined as being in precarious work in 2016, 15.1% were “self-employed”, 4.3% on a temporary contract, and 2.9% on “zero hours” contracts (which only comprised 0.5% of the workforce in 2006). 

Of the self-employed category, Philpott’s analysis suggests that half are low paid and take home less than two-thirds of median earnings and that two million self-employed workers were earning less than £8 per hour. Therefore, there was little “left to lose” for such voters by voting to leave an EU that was purportedly captured by elite “metropolitan” agendas.

Recent high-profile cases reported in the media against companies such as Uber, Deliveroo and Sports Direct have served to illustrate the conditions facing precarious workers. Uber, for example, recently lost a court case brought against it by a number of its own drivers. The judges in this case upheld the drivers’ claims that they should be treated as employees (rather than “self-employed”) and hence receive a statutory national minimum wage, holiday pay and sick pay. Given this, the Prime Minister has made statements pointing to addressing the needs of those “just about managing”(the so-called JAMs), and No. 10 has also expressed concerns at the conditions of work for those in precarious forms of employment; most notably in the lack of training opportunities for those in self-employment.  The Prime Minister has also previously mentioned that she would wish to see some form of employee representation on company boards.

However, the essential precariousness of work for most in the UK now is reinforced by findings from the Resolution Foundation that report that real weekly earnings were expected to only grow by about 1.6% over this decade, as opposed to 12.7% during 2000-2009, and over 20% during all decades prior to this, since the 1920s.

In this context, Phillip Hammond’s Autumn Statement contains a number of measures aimed at addressing the plight of precarious low paid workers. Amongst these measures were an announcement of a 30p increase in the national minimum wage (up from £7.20 to £7.50 per hour), a rise in the income tax threshold from £11,000 to £11,500 next April, a reduction in the Universal Credit tap rate from 65% to 63% (at a cost of £700 million) next April, a ban on estate agent letting fees for tenants, and no “plans” for further welfare savings during the current parliament. Also notable is £1.4bn earmarked for an additional 40,000 affordable homes (however, critics have questioned the feasibility of this scheme if the average price of such housing is only £35,000!)

However, the principal focus of the Chancellor’s relief measures have been to promote infrastructure and R&D, with £23 billion promised on infrastructure and innovation spending over the next 5 years, £2 billion p.a. on R&D funding by 2020, and £400 million earmarked on venture capital schemes. These measures are welcome, but arguably will do little to address the plight of precarious workers. The wage relief measures outlined above also need to be mitigated against the devaluation of the pound and consequent increase in inflationary expectations over the coming months, which will only serve to increase the cost of living. National infrastructure and R&D measures are also unlikely to do anything to address the vast disparities we see between communities (as the significant pockets of deprivation in the West Midlands attest, further fractured by class and ethnic disparities).

In Birmingham alone, the official unemployment rate remains over 10%, and to these we must add the “hidden unemployed”

In Birmingham alone, the official unemployment rate remains over 10% and to these we must add the “hidden unemployed” (that is, those who are “economically inactive” but “want job”). Including these people in measures of labour market deprivation points to real joblessness figures more in the order of one in six of the potential workforce. Here, there is clearly work to be done in identifying and mapping the labour market experiences of precarious workers. In this sense, whilst these policies are welcome, they are not in themselves sufficient to ensure “inclusive economic growth”. Rather, a mix of national and regional policies will be needed to tackle such entrenched inequalities. And in this sense, working with local businesses and community groups will be crucial.

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