Just about everyone is waiting to see what the effects of the decision to leave the European Union will be. At the moment, uncertainty reigns supreme, with many businesses across the UK a little more anxious about their futures than they were just a month ago.
So far the initial affects have been felt largely by the financial and property markets. The pound plummeted before staging a recovery; the FTSE 100 surged to an 11-month high; and a number of property funds suspending trading as investors, anticipating a fall in property prices, sought to redeem their investments.
But what impact can contractors expect to see over the coming months? At KPMG, our contractor specialists have taken a look at this unprecedented situation and have come up with the following predictions.
In the short-term, it is the uncertainty in the economy that is likely to have the biggest impact on contractors. Currently, businesses have no idea what the terms of the decision to leave will be, or when we will start to pull out of Europe. Inevitably, some businesses are likely to move outside of the UK, but in the meantime, the flexibility temporary workers like contractors offer could be increasingly attractive as businesses wait to see what the real impact will be.
Less positive for contractors is the decision some businesses are making, quite understandably, to delay major investments until the situation becomes clearer. The knock-on effect in this case is likely to be an increase in the number of businesses pausing their hiring decisions until they know more. The result is that some contractor positions could disappear.
There’s also the risk that some businesses may choose to look at their contractor policy and limit the amount of time contractors can work before they look for permanent employees. Typically, contractors earn more than employees, so organisations may not see the hiring of contractors as the best use of their resources while this uncertainty remains.
Over the slightly longer term, there’s the risk that an increasing number of businesses will choose to move out of the UK altogether. This could reduce the number of contractor positions available. However, given the devaluation of the pound, those companies that do move abroad may still look to employ UK contractors due to the value for money they represent. Those contractors who work in the EU currently, or who choose to move abroad to work, could also earn more if they are paid in local currency.
Unfortunately, the current fluctuation in the pound makes it difficult to predict where it will be in a week or so, let alone next month or next year. This uncertainty could add an element of risk to a contractor’s earnings.
The longer term
In the longer term, it is likely to be contractors working in the EU who are impacted the most. Some are already starting to look for jobs in the UK. At the moment no one knows whether contractors will need visas to work abroad in the future, and this could lead to an influx of contractors looking for work in the UK. This will increase the competition for jobs.
There’s also the potential for a recession. Economic growth forecasts have been adjusted downwards over the next three years and any recession is likely to have a considerable impact on contractor recruitment, particularly when you consider the additional costs of this type of worker.
Help is at hand
If you have any concerns about how the decision to leave the EU might affect you, or you’d like to know more about our specialist contractor accountancy service, please get in touch with our team today.
To find out how KPMG Small Business Accounting could help free up your time so you can concentrate on business success, request a callback for a quote today.
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