Jessica Pattinson of Dentons warns that the construction industry is facing an unprecedented impact from Brexit as the supply of labour from EU countries comes under threat. Employers will have to ensure compliance with immigration law.

This article was first published by the Construction Law journal on 2 July 2018. You can subscribe to the journal here.

Key points

  • Brexit will have an unprecedented impact on the labour market in the UK
  • The construction industry, with its reliance on EU labour, is particularly vulnerable to Brexit and any changes to free movement
  • With Brexit fast approaching employers should start planning, with a particular focus on steps to retain current employees who will be more difficult to replace post-Brexit
  • There is now a degree of clarity on what EU nationals in the UK will need to do to remain in the UK post-Brexit
  • With all of the above in mind, employers need to decide how they will support EU national employees, to ensure talent retention but also immigration compliance

With Brexit fast approaching there are still many questions to be answered about the process for EU citizens to remain in the UK, in addition to questions about what the future holds in terms of movement of labour and future immigration requirements.

In the construction industry approximately 10 per cent of the workforce are from the EU, with this percentage being significantly higher in some parts of the UK. In London over 30 per cent of workers in construction are from the EU. This reliance on EU labour makes the construction industry particularly vulnerable to Brexit and changes to free movement.

Some employers in the construction industry are already reporting issues with recruitment of workers as a result of Brexit. Official figures show that more EU nationals are leaving the UK than at any time since 2008. There are also fewer EU nationals arriving in the UK, after a peak in 2016. Whether this trend continues will largely depend on two things: the extent to which free movement is maintained following Brexit and the perception that EU workers have of the UK, including the ease with which they are able to work and establish a life here.

The recent Windrush scandal has not helped to build a positive impression of the immigration system in the UK. The European Parliament has specifically called the UK Home Office out on this and stressed that there must not be a repeat scandal involving EU nationals. The issues being suffered by the Windrush generation as a result of the 'hostile environment' highlight the consequences of not being in possession of the correct identity and immigration documents.

EU workers in the UK have been able to work here simply on the basis of their EU passport or ID card (setting aside transitional arrangements such as the Worker Registration Scheme that applied to nationals from the EU accession countries after the expansion of the EU into Eastern Europe). There are already concerns from EU nationals about whether they will qualify for the necessary immigration documents post Brexit, and whether the application process will be fit for purpose.

Current status of negotiations and application process for 'settled status'

With Brexit Day – 29 March 2019 – less than 10 months away, it feels as though we are both very close to Brexit and at the same time very far away. There has been very little progress on solving the issues with the Irish border, and negotiations regarding the UK's future relationship with the EU have barely begun.

Of all the issues to be dealt with on Brexit, negotiations regarding citizens' rights are perhaps most advanced, but there are still a number of key points to be clarified. While the UK government made attempts to ring fence the agreements on citizens' rights – to give EU nationals in the UK, and UK nationals in the EU certainty and a degree of comfort – the EU did not support its view on this point. We must therefore remember that 'nothing is agreed until everything is agreed'.

More information is becoming available on a daily basis, but what we know so far is:

  • There will be a transition period of 21 months from Brexit Day on 29 March 2019, until 31 December 2020. For the duration of the transition period, free movement of EU nationals will continue, although new arrivals during the transition period will be subject to a registration scheme if they intend to stay in the UK longer than three months.
  • EU nationals who arrive in the UK before the end of the transition period will be able to stay and, after five years of continuous residence, will be able to apply for settled status.
  • All EU nationals living in the UK, as well as non-EU nationals sponsored by an EU national family member, will need to apply for new residence documentation, regardless of whether they already hold a permanent residence document. With an estimated 3.5 million EU nationals living in the UK, the scale of this task is unprecedented.
  • Applications for residence documentation under the 'EU Exit Settlement Scheme' will start being accepted from August this year via a pilot programme, with a phased rollout to other groups from October 2018.
  • The UK government's key priority is to make the process simple and effective for EU nationals. Applicants will be encouraged to apply digitally, via a computer, laptop, smartphone or tablet. A paper application form will also be available. As part of the process the applicant will need to evidence their identity, either by having their original passport checked by the Home Office (most likely by posting their passport to the Home Office) or by using a 'chip checker' smartphone application that will read the biometric chip in their passport. As it stands, this will only be available on Android devices. Discussions with Apple to build a similar application for iPhones are ongoing.
  • The assessment of applications will rely heavily on data matching with HM Revenue and Customs and the Department of Work and Pensions. As part of the application an EU national will disclose their National Insurance (NI) number. If there are sufficient years of HMRC and/or DWP records matching the NI number then no further information will be required.
  • Criminal background checks will be undertaken as part of the assessment process but only 'serious or persistent criminals' will be targeted.
  • There is likely to be a fee charged for residence documentation, however the finer details are yet to be disclosed. The draft withdrawal agreement provides for this, however the European Parliament is of the view that EU nationals should not be charged a fee at all. We know that the maximum fee chargeable is £75.50, which is the current fee for a British passport. We will have to wait and see whether the fee for EU nationals is set at this level or lower, and whether it will be charged per person or per family unit.
  • The Home Office will aim to process straightforward applications in no more than two weeks. In assessing applications it will not look for reasons to refuse applications (which is arguably the situation at present) but will be able to exercise discretion in favour of the applicant.
  • Nationals of Iceland, Liechtenstein, Norway and Switzerland – which are members of the EEA but not the EU – should be treated in the same way as EU nationals. While negotiations have not progressed with these countries the UK government has advised that it expects to extend the offer made to EU nationals to cover the EEA.

What will your employees be concerned about?

An employer's response to Brexit is as much about talent retention as it is about immigration compliance. EU nationals in the UK did not vote for Brexit and many have expressed their disappointment and shock at the referendum result. No one would blame them for growing increasingly impatient at the slow pace of negotiations and the continuing lack of clarity, or for having a lack of confidence in the government's ability to satisfactorily deliver Brexit.

From an employer point of view it is critical to reassure all EU nationals that you are there to support them through what is likely to be a challenging time. With increased competition for skills and labour, employers who are not able to retain their EU workforce may find it difficult to replace them.

While the UK government is at pains to explain how streamlined, user-friendly, quick and easy the process will be, many EU nationals will undoubtedly have individual circumstances that will make the process anything but.

Some of the concerns we are hearing include:

  • The effect of non-compliance with the historical registration schemes for workers from accession countries, during their respective transitional periods after joining the EU. This includes: the Worker Registration Scheme for nationals of countries that joined the EU in 2004, which applied from 1 May 2004 to 30 April 2011; the requirement for Bulgarian and Romanian nationals to be in possession of a registration certificate or other worker authorisation if they worked in the UK from 1 January 2007 to 31 December 2013 and the same requirement for Croatian nationals who worked in the UK from 1 July 2013 to 30 June 2018. EU nationals who have voluntarily applied for confirmation of their current residence status in the UK under the current system are asked if they complied with this requirement. Many EU nationals were not aware of the requirement to comply with these schemes, or their employers at the time did not submit the relevant paperwork. While the Home Office is silent on how it will treat people in this situation we can take some comfort that the default position of the Home Office will be to 'say "yes" to applications'.
  • Whether short-term workers will qualify for residence documentation. Many EU nationals work for short, but continuing, periods of time in the UK, for example three months in the UK, followed by three months back in their home country. In order to continue to work in the UK after the end of the transition period on 31 December 2020 they are very likely to need residence documentation. The requirement to qualify for settled status is that an EU national has five years' continuous residence in the UK, meaning that for each year during the five-year period they should have spent no more than six months outside the UK. For many short-term workers this means that they should be able to qualify for settled status or, for those who have spent less than five years in the UK, a temporary residence permit (or 'pre-settled status' as the Home Office has started referring to it), which can be converted to settled status at a later date on reaching the five-year threshold.
  • Periods of self-employment where the EU national wasn't registered as a self-employed person. This could pose an issue with evidencing whether they were resident in the UK as they won't have a complete record with HMRC when the data-matching exercise is undertaken. They should, however, be able to provide alternative evidence of having been resident in the UK, for example council tax bills.
  • Whether family members including children and parents apply at the same time. The Home Office is proposing that each EU national should submit their own application, or have a legal guardian/parent do it on their behalf, but they will then be able to 'link' the applications for a family unit to ensure consistency of approach.

As we progress through the transition period there will likely be many more situations that will require individual support to ensure that key workers feel reassured about a future in the UK post Brexit, and their prospects of securing the required residence documentation.

What can employers do now to prepare?

Prior to the application system launching later this year employers should take steps to identify the EU nationals that work for them, make a plan for the package of support to be provided, and then start communicating this. While, as an employer, you are not under any legal obligation to assist workers and employees with the application process, it may be in your best interests to ensure that you retain the talent and experience you need, during a time of increased labour and skill shortages. The support you provide may include the payment of any application fees, information sessions for employees to learn about the process and/or individual legal support for more complex applications.

What does the future have in store?

As negotiations between the EU and the UK progress to discussing the future relationship, we should start to see glimpses of a post-Brexit immigration policy – and to what degree free movement is or is not retained.

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