UK as a hub: The Brexit effect

17 July 2017

A favourable tax environment, a strong talent market and excellent transport links are just a few of the many reasons why overseas companies choose to invest and set up in the UK. The UK as a hub, (or UKaaH, for those who can’t get through the day without an acronym) has become a business phenomenon in recent years. But will Brexit change all that?

In the days after the Referendum last year, I wrote that businesses, both big and small, don’t just come to the UK for access to the EU market. Amongst the huge variety of reasons I hear from clients for setting up a hub in the UK, I can honestly say that its membership of the EU was rarely mentioned. But that could be because, until now, it’s been a given. At the time I said that perhaps we should look at Brexit as just another market disruptor to be dealt with. A year on, have things changed?

I haven’t seen a huge decrease in UKaaH activity over the past 12 months but it’s very possible that the full effect is still working through. What I would say is that over the past year I’ve seen a slight shift in the make-up of companies I help to set up in the UK: There’s less movement from Europe, and more from Asia. There are also signs that a ‘dual hub’ model is growing in favour; organisations (particularly from Asia) are choosing to set up in the UK and another EU territory simultaneously, possibly so they can keep a foot in both the UK and in ‘Europe’.

Brexit isn’t just a UK issue; it has slowed up the pipeline of people movement across continental Europe. Decisions are being made in European territories that are clearly influenced by the Brexit decision. The cut-off point for Brexit negotiations – 29 March 2019 – is becoming a red line in the sand because it’s not clear what the immigration, social security and tax implications for people will be after that. So it’s becoming more common to see, for example, the German social security authorities issuing A1 certificates (the documentation retaining a globally mobile worker in their home territory’s social security system) up to 29 March 2019 only, as opposed to the usual two years or beyond.  

But business doesn’t stop; it just adapts. Many companies are taking time to see how the land settles before making big decisions about relocation and investment – but in the meantime, they’re still sending their people all over the world. Our Managing Mobility survey showed that informal travel is on the rise; that trend is independent of Brexit, but Brexit will undoubtedly increase that trend in the future.

I think we’ll see different kinds of EU people movement becoming the norm, including long-distance commuting and a rise in short-term business visitors. Geographical barriers to business are part of our past. Businesses and people are moving more fluidly between jurisdictions, and that creates a new collection of things to think about – such as permanent establishment and other business traveller risks. Whether the UK is your hub or not, a fluid workforce creates its own risks and challenges; in that sense, Brexit isn’t a game-changer – it’s just another change that employers must, and will, take on.

Jo-Anne Allen Bray
Office: +44 (0)23 8083 5335
Email: jo-anne.allen.bray@uk.pwc.com

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