Nowadays the United Kingdom is facing significant economic and political transformations caused by the Brexit decision. After the Brexit vote in July 2016, the country entered the transitional period, which should finish in March 2019 with the UK withdrawing from the EU membership. Due to the fact that their economies are highly integrated, Brexit could lead to considerable problems in the UK key economic sectors. Therefore, the aim of this paper is to analyse the impact of the Brexit referendum on employment, property and retail markets in the UK. For this purpose, a systematic review was chosen as a research design. On the basis of synthesizing and analysing the data provided by the latest economic and management surveys, it was discovered that these markets encounter several challenges caused by the uncertainty of future prospects expressed by market participants. Nevertheless, it was concluded that that in the long run, Brexit will be beneficial for the UK economy.
Brexit announcement has become a major event in the United Kingdom (UK) and the European Union (EU) lifecycle. A decision to leave the EU was taken by the referendum conducted on June 23, 2016. Currently, the UK is in the transitioning period, which will end on March 29, 2019, when the UK will finish its membership in the EU (CIPD 2018). The process of withdrawing from the EU will result in drastic changes in the country’s economic and politic life. Similarly, due to significant amendments to the legislation it is expected that Brexit will have a considerable impact both on the UK citizens living and working in the EU, and the EU and non-EU nationals living and working in the UK. Overall, it is expected that Brexit will positively influence the economic, political and social life in the UK, which in particular can be illustrated by the improvements in employment, property and retail markets.
Researchers agree that Brexit has led to multiple questions and uncertainty among employers and employees working on the UK market. Two years after the Brexit announcement new employment rules, processes and regulations for the period after the UK withdrawal from the EU membership are still not clarified. According to the Ibec, 19% of employers expect the negative impact of Brexit on the level of job creation. In particular, the UK government is going to introduce migration restrictions focused on attracting “the brightest and the best” EU nationals to the UK. As a result, these limitations could have adverse effects on the employment in unskilled or low-skilled industries. In this case, the major implications of Brexit are covering employees in the areas, which are mainly attracting high shares of EU nationals. For instance, these sectors include healthcare, retail, food production, hospitality, and construction (CIPD 2018).
Therefore, changes in migration and labour legislation could cause a shortage in the workforce supply. Nevertheless, Ibec also reported that other 17% of respondents claimed that Brexit would have a positive influence on the level of job creation. For example, on the one hand, the industries, which are employing higher shares of non-EU national workforce, especially in South-East England, will face difficulties in recruiting and retaining workers. On the other hand, employees in other parts of England are not expected to experience a significant shortfall in the workforce supply. Besides, the analysis of a post-Brexit employment performance is based on evaluating changes in labour productivity. According to the Office for National Statistics (2018), labour productivity can be measured as the value of output provided by a staff member during one hour. Thus, the analysis of key indicators of the labour market allows evaluating the impact of Brexit referendum on its current performance and assuming its future prospects.
The unemployment levels in the UK should also be examined in response to the UK migration. It is evident that access to talent and specific competencies is an important factor for business success no matter whether they employ low, medium or high-skilled workers. In particular, the researchers agree that the Brexit referendum may exert a significant impact on the sectors employing low-skilled and seasonal workers, who migrated from other countries. For instance, the report of Deloitte (2018) maintains that under the “hard” Brexit scenario, the immigration from the EU countries will be severely curtailed. As a result, the labour intensive vacancies traditionally done by EU labourers could face an insufficient workforce supply, since the UK nationals do not accept such jobs. Nevertheless, the scholars expect final Brexit rules and regulations will also have considerable implications on the access to foreign workforce regardless of the level of skills involved.
Similarly to the labour market, a property market also encounters both benefits and drawbacks from Brexit due to a number of provided risks and opportunities. In particular, the researchers agree that the decision to withdraw from the EU membership brings significant uncertainties to the UK performance and its impact on property values. On the other hand, Hamptons (2018) proves that the risks of Brexit can be compensated by the effective currency discounts that appeared after the referendum. Therefore, the analysis of the UK property should be conducted in response to new market expectations, evaluation of the UK property (mainly luxury), currency changes and new taxation.
Retail market is affected by a number of factors, which could dramatically change its current performance. One of those factors highlighted by the researchers is the total level of customer confidence (Deloitte 2018). This measure can be calculated as a share of consumers who increased the level of their expectations about the positive performance of the market during the past three months extracted from the share of those customers, whose expectations worsened during the same period of time. Besides, in terms of the retail business expectations concerning the impact of Brexit on the UK economic performance, a list of the following expectations could be provided. In particular, according to the survey conducted by Ibec (2018), almost half of businesses (47%) estimate that Brexit will have a negative influence on exchange rate movements (47%). Moreover, almost one third of businesses believe that Brexit will adversely affect the level of imports from the UK (31%) and the level of exports (27%) (Ibec 2018). Nevertheless, retail businesses also have some positive expectations about Brexit. For instance, Ibec (2018) discovered that UK companies anticipate to win new inbound investment projects and benefit from attracting the UK workforce (16% versus 10% of those, who conversely predict a negative impact on these business aspects).
In addition, the researchers agree that the UK retail market will be affected by changes in export and import volumes with the EU markets. In particular, during last decades, the UK export market was mainly performed by the EU countries. For example, as Deloitte (2018) reported, the share of the UK export of goods and services to the EU accounts for almost 40% of its total export. Besides, as a part of the EU, the UK enjoyed significant benefits of free movement of products, which excluded tariffs and duties, as well as free access to the service providers. Moreover, the international trade between the UK and other EU members was developed under the simplified trade procedures. Therefore, Brexit with its tariff introduction could create considerable barriers for further development of the UK international retail trade.
In order to discover the impact of the Brexit referendum on the UK employment, property and retail markets, a systematic review was chosen as an appropriate research design. A systematic review was based on analysing and synthesizing the findings presented by the latest surveys, which focused on the UK economic performance in certain research areas. In particular, the labour market analysis involved the data provided by the Office for National Statistics, PWC and Deloitte in their recent surveys. Further, the analysis of property market performance integrated the research conducted by the Hamptons, while the retail market analysis included the data provided by the Office for National Statistics, Ibec’s observations of market participants’ expectations, and Savills’ research. Overall, the systematic review allowed summarising the current evidence of the UK key economic areas and comparing their performance in relation to the Brexit referendum.
Generally, the post-Brexit performance of the UK labour market is characterised by a down trend of the unemployment rates for all ages. In particular, after the Brexit announcement in June 2016, the unemployment shares continued decreasing among people of the following age groups: 16 and over, 16-64, 25-49, as well as 50 and over.
During the period of March-May 2018, their shares reached the lowest levels calculated for the last 5 years. It is notable that the highest unemployment rate is referred for the age group of 18-24. Nevertheless, the Brexit announcement did not change a downturn trend of unemployment rates for people in this age group. Therefore, the unemployment levels in the UK continued reducing even regardless of the UK official decision to withdraw from the EU membership.
Further, the unemployment rates depending on the workers’ nationality are characterised by a continuous decrease. For instance, as the Office for National Statistics reported, the unemployment rates of the UK citizens kept lowering after the Brexit announcement from 4.8% of total economically active people in April-June 2016 to 3.9% in April-June, 2018. At the same time, the unemployment rates for total non-EU citizens faced a significant increase during the 2017, which in its turn changed to a downturn trend in 2018. Hence, after Brexit, the overall unemployment levels have been declining for all nationals working in the UK.
As the Office for the National statistics reported, job opportunities remained the main reason for a long-term migration to the UK. In particular, this year until March, almost 253 thousands of immigrants arrived to the UK for the working purpose (Appendix A.2). Hence, the work reason accounts for 41.13% of all aims for immigrating to the UK. In particular, 69.56% of people coming to the UK to find employment had a definite job, while remaining 30.44% (77 thousands) were only seeking for a position (Appendix A.2). It is notable that in 2018, there was a fall in the number of EU citizens coming to the UK for a definite job to 86 thousand, which is similar with the 2014 level (Office for National Statistics 2018d).
As it was expected, the Brexit announcement resulted in the decline of the net migration rates to the UK. According to the Office for National Statistics (2018), in contrast with the peak years of 2015 and 2017, the net migration significantly decreased, but it further remained stable. Nevertheless, in March 2018 (the last reported date), the net migration level even increased by 28 thousand comparing with March 2017.
Overall, the net migration from the EU countries started to decline after the Brexit announcement. As the Office for National Statistics (2018) reported in March 2018, the EU net migration reached the lowest level since 2012 with only 87-thousand volume, while in June 2016, it accounted for 189 thousand. This tendency can be explained by the fact that due to the unresolved new immigration rules caused by the Brexit decision, some EU workers decided to return to their home countries. Additionally, the number of employees coming to the UK also decreased. For instance, in March 2018, the number of EU citizens who immigrated to the UK was 226 thousand, while the number of EU citizens leaving the UK reached 138 thousand (Office for National Statistics 2018). Therefore, the net levels of migration from the EU countries remain positive indicating that more EU citizens are still coming to the UK rather than leaving.
On the other hand, the net migration from non-EU countries exceeded its value for the EU states and followed an overall rise since 2016. In particular, in March 2018, the immigration from non-EU countries reached 316 thousand following an increasing trend after 2015.
However, it is expected that new immigration rules of the UK will provide more stringent requirements to foreign citizens, particularly in working visas as well as demonstration of talent and skills. Therefore, companies, which are attracting high-skilled workforce, will also face a decreased mobility in hiring foreign professionals, which will result in reassessment of contracts, remuneration and benefits. However, a negative impact of such a situation is related with the concern that the UK could lose its status on the world stage, i.e. because of moving of technology-skilled professionals to their neighbouring countries.
Regarding the shortage in the workforce from the EU counties, the total employee productivity significantly increased after the Brexit announcement. According to the report of the Office for National Statistics (2018), in the first quarter of 2018, the productivity index was 100.7%, while in the quarter before the Brexit announcement the productivity level was 99.5%.
The major contribution to the productivity level was provided by the non-financial services, while finance and non-manufacturing production decreased their productivity during the year until March 2018 (Office for National Statistics 2018). Such a negative effect on the productivity can be explained by the exhausting reserves of oil and gas in the North Sea (Office for National Statistics 2018). Therefore, the Office for National Statistics (2018) suggested that on average, the UK businesses engaged into the international trade business were 70% more productive than non-traders. In particular, after controlling the industry, size and ownership status, businesses involved into the imports and exports of goods remained to be 20% and 21% more productive respectively (Office for National Statistics 2018). Therefore, there is a positive relationship between the business engagement into the international trade and their productivity. Besides, different effects were discovered for trading relationships between the EU and non-EU markets. For instance, the Office for National Statistics (2018) reported that the productivity premium is higher for the companies trading with the non-EU markets than for the ventures engaged into the EU trade. Hence, it could be concluded that businesses with lower productivity face smaller barriers for accessing the EU markets, unlike the non-EU markets.
Overall, the analysis of the employment market in the UK after the Brexit announcement proved that new migration regulations could significantly change the labour market of the UK. Therefore, local and international businesses operating in the UK territory might face a considerable workforce shortage after the implementation of new regulations. In particular, currently, the UK businesses have already experienced a downturn trend in attracting the EU nationals, while the number of people arriving from non-EU countries increased.
The UK property market is also subject to an impact of substantial uncertainties related with the consequences of the Brexit vote. Thus, according to Hamptons (2018), the pace of capital growth in the prime areas of the capital is mainly influenced by the recent changes in the UK property taxes due to their effect on the expectations of future capital gains. For instance, the costs of buying property are affected by the raft of tax changes focused mainly on the most expensive property. Besides, the prospects concerning property price and negotiations were also affected by the new supply of luxury property. Moreover, Hamptons (2018) discovered that regarding the Brexit concerns and higher taxes on property, the share of prime central London property purchased by international buyers accounts for more than 51% of total sales. It is notable that this share is continuously increasing after the Brexit referendum. Such a tendency can be explained by fluctuations in the exchange rate, which boosted the activity of international buyers. In addition, after the Brexit announcement sterling fell sharply against the Euro and the US dollar, and in the end of 2017 it lowered by 13% and 9% respectively. Therefore, a fall in sterling promoted the benefits for international buyers of the UK property, which can be explained by savings in the currency.
Consequently, despite the concerns about the UK’s economic position after Brexit, in terms of customer confidence, the country performs even better than New York, Paris and Hong Kong in most categories of factors that are important to high-net-worth individuals. Hence, the UK is still ranked as the most attractive economy for conducting a business, which in turn facilitates the attractiveness of its property.
Similarly to other economic areas, retail market participants also remain cautious about the post-Brexit performance. Both 2017 and 2018 were challenging to the UK retail market, which is related to the impact of various factors. In particular, the Brexit referendum caused alertness of the retail businesses in terms of the future EU-UK relationship model as well as the questions of exit and any transition arrangements (Deloitte 2018). Other factors that influence the level of retail business concern about the post-Brexit performance include the process of labour attraction; laws on product labelling; company location; supply chain development; along with access to tariff and non-tariff restrictions. Besides, the retail sales volumes are affected by the level of customer confidence, which remained negative during the last eight years. Nevertheless, this adverse tendency increased after the Brexit referendum.
In addition to the market expectations, the UK retail market is also impacted by the high inflation rates. The CPIH significantly rose after the Brexit referendum. Some experts believe that the main reason for such a growth was a falling sterling (Deloitte 2018). These assumptions are supported by the findings of Savills Commercial Research (2018), which showed a severe downturn in the retailer demand sentiment index after the Brexit vote (Appendix B). In particular, Savills Commercial Research (2018) revealed that in the last year. prime retail locations demonstrated the greatest resilience. On the other hand, Savills Commercial Research (2018) discovered that in the same period, the remaining sectors of the retail market were characterised by stagnation in occupational demand. Besides, the data provided by the Office for National Statistics (2018c) unravelled a rise in the value of the amount of family spending. For instance, in July 2018, the volume of retail market increased by 3.5% comparing with the previous year (Office for National Statistics (2018). Further, the in-store retailing was shifted by the growth in online retailing. According to Savills Commercial Research, in July 2018, online sales escalated by 15.3% in contrast with the same period of the previous year. Moreover, a substantial upsurge is evident on the annual basis regarding the effect of the Brexit announcement. As a result, in July 2018, the proportion of online retailing reached 18.2% from total retail sales, which is the highest level for the whole observation period (Office for National Statistics 2018). Nevertheless, retailers still recognize an important role of store in developing a positive buying experience of their customers. Therefore, stores are used to drive online sales, particularly in the groups of product, which clients prefer to “touch and feel” before the purchase.
In addition, after the Brexit vote, the UK retail market was impacted in terms of changes in consumer spending. As the Office for National Statistics (2018) reported, at the end of 2017 financial year, the average weekly household spending increased to £554.20 thereby reaching a pre-economic recession level. Thus, it could be concluded that the Brexit referendum did not alter spending patterns of the UK citizens, which even led to the growth in the overall consumer spending.
Consequently, the analysis of the post-Brexit referendum economic environment showed that in the long run, the UK employment, property and retail markets will face significant improvements in their general performance. However, in the short term, these markets tend to encounter several challenges caused by a high level of uncertainty about future prospects. In particular, the investigation of the UK labour market revealed that restrictions on the immigration laws resulted in the decrease of the overall volume of the EU citizens who immigrated to the UK. Since a job search is considered to be the major reason of immigration, such a decline could lead to the shortage of high and middle-skilled employees. On the other hand, the immigration level from the non-EU counties escalated thereby providing a greater level of workforce supply engaged mainly into the labour intensive industries.
Further, a systematic 'write my persuasive essay for me' analysis allowed discovering that changes in the sterling exchange rate against the Euro and the US dollar triggered an enormous increase in the demand for the UK property. Regarding an existent level of uncertainty about the future state of the post-Brexit legislation, the UK still remains a popular long-term investment option among the foreign investors. Finally, the examination of the retail market proved that the negative levels of the observed customer confidence appeared to be higher after the Brexit referendum. It is also notable that the Brexit announcement caused a drastic decline in sterling exchange rate, which resulted in increased inflation. However, besides significant concerns about the reduction in the export rates to the main market of the UK represented by the EU countries, a rise in family spending continues to be profitable for the companies focused on the internal retail consumption. Moreover, a growing trend in online sales is a positive sign for the UK retail industry. Therefore, in the long run, Brexit will be beneficial to the UK labour, property and retail markets, even though it still represents several concerns in the short-term observation.
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