Impact of Brexit on United Kingdom’s Human Capital Development

Brexit Voting Pattern

The Brexit vote in 2016 remains the largest in the democratic history of the United Kingdom (UK). Here is a discussion on the impact of Brexit on United Kingdom’s human capital development.

Although a significant number of Brexit votes were cast outside London, discussions on the human capital effects of Brexit have been concentrated essentially on the capital.

Available data on the Brexit voting pattern from the Office for National Statistics on UK’s twelve (12) regions revealed nine (9) regions voted for “Leave;” and three (3) voted to “Remain.”

The nine regions included eight regions of England outside London and Wales. The three regions included London, Scotland, and Northern Ireland.

Analysts described the behaviour of voters in the eight regions outside London as an evolution from “being the most Euroenthusiastic to the most Eurosceptic.”

Research on Brexit revealed individuals voted respectively for sovereignty, migration, and economy.

The referendum on Brexit has generated controversy and uncertainty among most people in the United Kingdom.

Some political analysts attribute the controversy and uncertainty to the limited understanding associated with the “leave Brexit” vote.

Some Brexiteers hold the belief UK’s membership to the EU resulted in plethora of onerous business and trade regulations and that, Brexit would lead to mass deregulation.

However, extant research by world bodies such the Organisation for Economic Co-operation and Development (OECD) showed the UK is one of the global economies with very flexible labour regulations: the UK has one of the highest labour regulations in the EU.

Most people are unclear about the final Brexit negotiations to be concluded by the United Kingdom government; and the impact of the negotiations on prices of goods and services, wages, salaries, and other essentials that would affect the lives of individuals at the end of 2020 and beyond.    

Brexit Implementation Period

The terms of withdrawal from the European Union have been agreed to by the United Kingdom. However, a decision on the future relationship between the two parties remains outstanding.

To address the foregoing, a Brexit implementation or transition period has been agreed to by the United Kingdom and the European Union.

The implementation period started immediately after the Brexit day and due to end on 31st December, 2020.

During this period, the trade relationship between the UK and EU would remain unchanged; and the former would comply with rules of the latter.

The implementation period is intended to provide both parties with some socio-economic respite while a new free trade agreement is negotiated.

Other aspects of the UK’s exit and the implementation period were agreed in a separate deal called the withdrawal agreement, most of which were negotiated by former Prime Minister Theresa May’s government.

The rights of EU citizens in the UK and British citizens in the EU during the negotiation period would remain unchanged.

Article 50 of the Lisbon Treaty provides a road map for how the UK’s exit from the EU could be managed.

It affords all member states of the European Union the opportunity to veto on any part of negotiated deal(s); and empowers the European Union to determine the pace of negotiations.    

The most “controversial” part of the Brexit deal known as the Backstop was expunged by Prime Minister Johnson following his assumption of office in July 2019.

However, prior to Prime Minister Johnson’s action, many Conservative Members of Parliament and their allies (the DUP) expressed scepticism about the Backstop deal; they argued the UK could be trapped in the agreement for a considerable number of years without a clear-cut solution.

The new free trade agreement has become an economic desideratum because the United Kingdom would withdraw her membership from the Single Market and Customs Union at the end of the implementation period.

As noted earlier, the EU has a free trade agreement which allows free movement of goods in and around the EU without extra charges or checks or both.

The European Commission has expressed pessimism about the transition period; it believes the time table would be extremely challenging.

However, Prime Minister Johnson has assured the implementation period would not be extended.

The Backstop was designed to ensure the absence of border posts or barriers between the Republic of Ireland and Northern Ireland after Brexit.

The Backstop agreement would have maintained a close trading relationship between the UK and EU.

The revised agreement under Prime Minister Johnson calls for the creation of a border between Great Britain and Northern Ireland.

The implication is some goods transported from Great Britain to Northern Ireland would be subject to checks and EU import tariffs or taxes.

A refund is assured if the goods remain in Northern Ireland, and not transported to the Republic of Ireland.            

Brexit and Conflict Resolution

The impact of Brexit on conflict resolution.

An apt resolution of internal and external conflicts is analogous with the maintenance of peace; and acceleration of national, regional, and global economic growths.

Mr. John Van Reenen of the UK described Brexit as “the vanguard of a general assault against reason and facts – things that [people of the UK would] have to fight very hard for over the next 5-10 years under the attack of the Brexiteers.”

He Believed the EU’s ability to address global issues such as real risk of military conflict, consequences of different forms of technologies, and climate change, among others, is higher and effective than when the UK has to tackle those issues in isolation.

It is worth noting the UK remained the only member state that met the European Union’s international commitments of international aid spending of 0.7% of GDP; and 2% of GDP on defence.

Human Capital Effect

The impact of Brexit on human capital.

A strong belief commonly held among most people in the United Kingdom is the existing European Union conditionalities and agreement do not allow the labour market to unearth domestic talents, as the economy experiences influx of human capital from countries within and outside the Union.

Thus, the impact of Brexit is expected to minimise the influx of “foreign” human capital and encourage effective and efficient training of UK nationals for national development and growth while addressing unemployment challenges associated with the youth and section of the active labour force.

A survey conducted by the Office for National Statistics on UK labour force from September 2019 to November 2019 indicated the estimated number of unemployed who are 16 years and over is about 1.31 million, representing about 3.8%.

An identified issue is limited investment in training and skills for European Union migrants in the United Kingdom.

The research revealed no indications of organised training programmes by businesses to replace employees from non-EU member states.

Maintaining a points-based migration system would require huge investment by firms in the skills development and training of their staff.

However the impact of Brexit, it is believed, would allow firms to channel significant portion of their skills development fund towards training of UK nationals to enhance their competitiveness in human capital at the domestic, European, and global levels.

By Ebenezer M. Ashley (PhD)

Fellow Chartered Economist & CEO of EBEN Consultancy,

Email: ebenezer.ashley@gmail.com

Website: www.ebenezerashley.org

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