UK: Brexit: What Next For UK Based Employers In The Financial Services Sector?

Last Updated: 13 July 2016
Article by Nick Elwell-Sutton, Mark Howard and Tim Richards

For now, employment rights and obligations will continue to be subject to EU law in the same way as before the referendum. So, for employment law nothing is likely to change until the UK exits the EU, or the terms of our changed relationship are known. The extent to which the UK may be able to change employment laws could well depend on these terms. Of more immediate concern to the financial services sector is the uncertainty of knowing what lies ahead: the Rumsfeld "unknown, unknowns".

Of particular concern is the issue of whether passporting rights (that is the system that allows financial services businesses regulated in the UK to operate freely across the EU) are included in any exit deal. The loss of these rights would mean inevitable redundancies as firms are likely to move some of their activities to other EU financial centres such as Dublin, Frankfurt or Paris and seek regulatory approval there to ensure continued unfettered access to EU markets.

Set against this, the City is the largest global financial centre and the heart of Eurozone's financial system. It is uniquely positioned as a hub between Europe, Asia and the U.S. and the City's key attractions will largely remain: political stability; cosmopolitan atmosphere; social and cultural activities; English language; lack of corruption; benign business environment; moderate workers' rights and the predictability and integrity of its legal system. This will continue to pull in skilled workers from all over the world and make London a place that people will inevitably want to live and work in and so continue to provide a talented pool of workers for business.

We do not know at this stage what future immigration controls will look like but since immigration has been one of the prime issues in the Brexit campaign, it is likely to feature highly in any negotiations for a trade deal. Because of the City's global status, thousands of EU and non-EU citizens are employed in it and many of those will be key staff. For existing EU national employees in the UK, the current position is they still have a right to work but it remains to be seen whether any transitional provisions are put in place and whether, once the UK's EU membership is formally terminated, they will become subject to UK immigration control.

Employers should now audit their staff to see the extent of EU nationals working in the UK and whether they could, for example, apply for Permanent Residence in the UK. If UK nationals are operating in other EU member states, thought could also be given to whether they would require permission to work in the future if reciprocal restrictions on UK nationals are implemented. Advice should be sought as soon as possible on what action can be taken now to protect key staff identified.

Sovereignty was another important issue in the Brexit campaign. So, would leaving the EU allow the UK to rescind some of the regulations it considers damaging to its competitiveness? The new rules limiting bankers' bonuses to twice their salaries might be a prime target, for example. But any real freedom to cut such regulation might be limited. Outside the EU, the UK would be treated as a "third country". So, like Switzerland, it might be required to ensure its regulations are seen "as equivalent" by the EU in order to maintain access to the EU financial markets.

Likewise, in order to obtain a free trade agreement, the UK may be forced to accept EU social and employment regulation. Members of the European Economic Area (EEA), such as Norway, are bound by most of EU employment law even though they are not part of the EU decision making process. Switzerland has negotiated a number of agreements with the EU and is in a similar position.

But let's assume for now, the UK manages to negotiate an exit which doesn't bind it to EU social and employment rules. Which parts of UK employment law are at potential risk of change? EU law has provided UK workers with a safety net which has prevented the UK government and the UK courts from reducing workers' rights below a minimum core level. Leaving the EU will mean that the UK government is free to remove and alter those rights. Any change will depend on the political will at the time, but top of the list might be how holiday pay is calculated, how holiday pay accrues during periods of sick leave, agency worker rights, capping discrimination awards and the current restriction on harmonising terms and conditions of employment after a TUPE transfer. Employment laws which are purely UK derived will be unaffected. These include redundancy pay, some unfair dismissal rights and national minimum wage.

Financial institutions with operations in Scotland face a period of greater uncertainty because of the risk of a second referendum for Scottish independence. Should Scotland break away from the UK and be successful in its application to get into the EU (neither of which is a foregone conclusion), there could be a gradual divergence of Scottish and UK employment rights. Under the current plans for Scottish devolvement, the newly passed Scotland Act devolves power over the operation and management of employment tribunals to the Scottish Parliament allowing it to exercise powers relating to rules of procedure, membership, administration and funding of tribunals – including the abolition of tribunal fees. Other than this, there has been no intention, so far, to give Scottish Parliament independent powers to change employment laws.

Many financial sector employees continue to have legacy defined benefit pension schemes. The referendum result has led to volatility in the investment markets and the fall in gilt yields which has the impact of increasing the value of pension scheme liabilities and therefore deficits. This may be compounded by trustees concerns over the weakening of the "employer covenant" supporting the scheme as a result of the referendum, with the consequence that trustees may become more cautious in the assumptions they use – increasing the value of liabilities furthers.

Longer term the impact on pensions would depend on the form Brexit takes. The UK successfully campaigned against stronger funding requirements in the latest EU Directive on Institutions for Occupational Retirement Provision (which has yet to complete is legislative process). If the UK remains in EEA it may find that future directives will impose stricter funding requirements. 

Finally, upon leaving the EU, there could follow a period of uncertainty as to what the law on certain issues actually is. Holiday pay is a good example of this. Recently the European Court of Justice ruled in Lock v British Gas, that commission must be taken into account when calculating holiday pay. Following this, the UK Employment Appeal Tribunal ruled earlier this year that the UK regulations must be read as though they actually provide for this . This ruling now forms part of UK law which employers must abide by. But what is the status of its ruling after a UK exit? Could an employment tribunal simply ignore it, and simply interpret the UK regulations as they stand? The point may become clearer when we understand more about how the European Communities Act 1972 is to be repealed.
Of course, if Brexit negotiations culminate in a deal with the EU, it is possible that the UK courts would continue to see ECJ decisions (both past and future) as persuasive and perhaps even binding if the UK ends up with a Norwegian model trade and social deal.

Brexit: What Next For UK Based Employers In The Financial Services Sector?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Nick Elwell-Sutton
Mark Howard
Similar Articles
Relevancy Powered by MondaqAI
Clyde & Co
Mishcon de Reya
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Clyde & Co
Mishcon de Reya
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions