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UK "Brexit" with EU: what human resource lessons can Thailand learn?

On 23 June 2016, British voters will take the momentous decision, whether to remain or leave the European Union. The most important issues creating the potential break-up are three-fold: firstly employment and wages, especially related to immigration of EU and non-EU citizens; secondly, the powers, pressures and costs of adherence to an overweight Brussels bureaucracy; and thirdly assessment of whether Britain is a net beneficiary or loser from the overall EU relationship.

Thailand is far away from the UK and the EU, but the issues are highly relevant. Thailand is a member of ASEAN, AFTA and now AEC and is studying the possibility of joining the Trans Pacific Partnership, with several similarities to the EU. It is one thing to accede to membership of a trade pact, such as the European Free Trade Area (EFTA) or AFTA/AEC, but a more risky step to accede to an extended agreement such as the EU or TPP.

The uncertainties preceding the 23 June vote have adversely affected job hirings and business expansion plans in the UK. If voters opt to leave the EU, this will mean invoking Article 50 of the Lisbon Treaty, and two years of renegotiation of future EU relations. The UK may seek to join the European Free Trade Area, alongside Switzerland, Liechtenstein, Norway and Iceland. Meanwhile continuing uncertainty may force UK and EU companies to adopt contingency plans for a variety of negotiation outcomes. However some companies, fearing the worst, may move operations to an alternative continuing EU member country.

So what are the big issues that voters ought to be considering, before opting for an OUT vote? These eight basic human resource-related concerns have dominated debate:

- Family income: will UK families be worse off?

The British Treasury has come up with a range of scenarios relative to Britain’s level of continuing relationships with the EU, but the conclusion most often adopted is that departure from the EU would cost each UK family £2,600 (Baht 130,000) per year in lost income;

- Job security: would there be job losses?

Britain’s Centre for Economics and Business Research has forecast that staying in the EU could create 300,000 new jobs by 2020, rising to 790,000 new jobs by 2030. It is further estimated that 4.2 million existing jobs are associated with the EU. Not all jobs might be lost upon departure, but the balance of business opinion is that EU membership has been a strong net benefit for the UK economy;

- Employment growth: would phased departure from the EU result in reduced overall employment?

According to a report by the Confederation of British Industries together with PwC, GDP in the three years to 2020 would reduce by up to 3 per cent, even with some form of agreement with the EU on a continued trade relationship. This would result in increased unemployment of 2 to 3 per cent. That could mean 550,000 to 950,000 fewer jobs by 2020. There would be reduced immigration and exodus of existing employed population. This could mean an overall shrinking economy, affecting a range of service and consumer-based employment;

- Bureaucracy: is the Brussels EU establishment worth its cost?

The UK is reported to spend £14 billion (Baht 700 billion) in contributions to EU funds. However the EU offsets these payments by a variety of funding benefits for agriculture, research and development, university research and regional development. However the richer EU nations, of which the UK is one, provide support for less developed ones, seen as an investment for the future prosperity of the whole region;

- EU employment regulations: would UK departure result in amendment, saving money?

The EU has legislated a wide range of employee rights and privileges, applicable throughout the EU, relating to working hours, welfare, consultation, leave privileges. While beneficial to workers, these are costly for industry. Repeal of some of these pan-EU regulations might save more than £5 billion (Baht 250 billion) per year. However, given the strong trade union and activist movements in the UK, it is unlikely that these privileges would be easily repealed;

- Migration: do welfare benefits subsidise unproductive immigrants?

UK Prime Minister David Cameron suggested that over 40 per cent of EU citizens migrating to the UK were on welfare. Alternative findings suggest that EU migrants do not come to the UK for welfare benefits. Other EU countries may offer more benefits than the UK. Rather they benefit from welfare services that arise from being participants in on-the-job national insurance benefits for family members. Being in the earlier days of UK residence and employment, they are likely to be lower paid than longtime UK citizens, and may therefore qualify for larger benefits;

- Immigration controls: will these adversely affect GDP growth?

Immigrants increase population, have high employment levels, are relatively young, upwardly mobile and a positive contribution to an otherwise ageing society. The UK Centre for Economics  and Business Research forecasts losses to GDP growth over the next 40 years, arising from UK exit from the EU, at between -6.7 per cent and -2.0 per cent; does it promote GDP growth?

OECD research suggests that it would be better for both the UK and for the EU, if the present relationships prevail. In the OECD case, the cost to each household of departure amounts to £3,200 (Baht 160,000) per year. It is also suggested that half of GDP growth since 2005 has been due to involvement of immigrants in the economy. Highly skilled workers not only make their own contribution to economic growth, but also enhance the performance of less-skilled workers, so everybody benefits. Many jobs that UK nationals do not want to perform, are undertaken by immigrants.

The economic and human resource arguments for the UK to remain in the EU are strong. A referendum on whether Scotland might secede from the UK was narrowly decided in favour of remaining. If the vote goes against the UK remaining in the EU, a new referendum for Scotland’s independence might result in Scotland rejoining the EU as an independent nation, leaving England, Wales and Northern Ireland excluded from an increasingly prosperous Europe.

For Thailand, the EU and UK are important economic, business, trading, educational and cultural partners. The UK experience with the EU can provide guidelines for Thailand in its relations with the AEC and TPP. It is necessary to fully appraise the potential consequences of joining and extending international agreements. It is easier to enter than to leave. Severance can be complicated and costly.

About the author: Christopher F. Bruton, 45 years in Thailand, is Executive Director of Dataconsult Ltd, a local consultancy. He can be reached at