Brexit and Freelancers: The Consequences on Europe's Leading Market
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“How is Brexit going to personally affect me?”
This is the question on many people’s minds as the uncertainty and unpredictability of Brexit continues. The freelance marketplace continues to grow in importance to the British economy with a contribution of almost £300 billion a year. IPSE (the Association of Independent Professionals and the Self Employed) estimates there are 5 million self-employed people in the U.K., with around 2 million of those being freelancers. This is one of the largest freelance economies in the world, but how will it be affected by the Brexit process?
Impact on freelance recruitment
Understandably, one of the key concerns around Brexit is how it will affect the recruitment budgets within different industries. Will the demand for talent drop as companies tighten their purse strings amid the chaos? Will they turn even further towards freelancers as an alternative option to the commitment of hiring permanent employees? In reality, at this stage, no one can definitively say how it will look after the U.K. leave but we can look at some of the key predictions. Will this be an opportunity? Could freelancers benefit in the uncertainty created through Brexit?Brexit uncertainty may turn U.K. companies to freelancing. Over the past 15 years, we have observed the trend of more and more businesses -- small or large -- turning to freelancers. There is certainly reasonable information available to suggest that the uncertainty around Brexit will only increase organizations’ reliance on freelancers as they offer a risk-free option to complete a project.
Talent shortage could have a positive effect. Another factor to consider for recruitment is the talent that will be leaving the U.K., either to return to their home country or simply to move back inside the European Union’s borders. There is a possibility that we could see a talent shortage in this area, which could be another reason for companies to look to freelancers if they can’t find the permanent talent they require.
End of free movement: Many freelancers work with companies based in the European Union and there is a legitimate concern that these organizations would look to freelancers within the EU27 for administrative simplicity. For freelancers based in the U.K. working with EU clients, the end of free movement will have a more negative impact.
Tip to remember: While no-deal is still unlikely, it is not completely off the table. Make the preparations for the worst-case scenario, particularly if you are working with clients based in the EU.
Impact on free movement
Freelancers are, by definition, free. This offers the advantages of taking work in multiple countries for the right opportunities. For workers inside the European Union, this couldn’t be a simpler process. There are no visas required and few administrative barriers to overcome in order to work for a business based in the European Union. Clearly, the changes that Brexit will cause is a major concern for freelancers who are working across different countries in Europe. IPSE made its stance clear:
“Single market access and the free movement of skilled professionals across the European Union should be prioritized by the government in negotiations.”
While it would certainly be a positive step for U.K. freelancers if free movement was retained, it remains unlikely that this will happen, so make sure you are preparing in advance for life without free movement.
Removing free movement will undoubtedly have a negative impact on the freelance economy and could threaten the U.K.’s status as a leader in certain industries e.g. the creative industry. It’s possible and perhaps, likely, that companies based in Europe will look for freelancers who will also be EU-based, after Dec. 31, 2020 -- if that is when the U.K. does end up leaving.
Tip to remember: Expect your trips towards European countries to cost, on average, 25 percent more, so maybe it’s a good idea to stick (or increase) to remote meetings and call. Speak to your clients based in the EU beforehand, so that you can work out a strategy with them post-Brexit.
Impact on taxation
Another area that has raised questions in the Brexit process is how it will affect VAT charges between the U.K. and Europe. If the U.K. leaves the European Union with a deal in place, then it is expected that the current rates of VAT and the way they are charged will stay similar to how they are currently. As with almost any subject regarding Brexit, the concern heightens if the U.K. were to leave with no deal in place.
Theoretically, the government could then vastly change its VAT rules. However, the U.K. government has been reassuring that in the case of a "no-deal" Brexit, they would not look to increase VAT charges on goods and services. They have also suggested that the rules around "place of supply" would also broadly stay the same.
“For U.K. businesses supplying digital services to non-business customers in the EU, the ‘place of supply’ will continue to be where the customer resides. The VAT on services will be due in the EU Member State within which your customer is a resident.”
At this moment in time, it doesn’t look like there will be a huge impact on taxation for U.K. freelancers which is good news.
Tip to remember: Things probably won't be altered too much, but make sure you follow developments closely as this can quickly change.
Impact on intellectual property and copyright
Much of Intellectual Property (IP) law is harmonized across the EU, and a vast majority of the legislation in the U.K. in this area is a direct result of EU regulations. Thereafter, freelancers and small-business owners who are IP owners should identify which of their rights are now likely to be affected and may need further application/registration in order to achieve maximum protection over that right. According to the government’s breakdown of the rules: “Applicants with pending applications for an EU trademark or a registered Community design will not be notified and after exit will need to consider whether they refile with the Intellectual Property Office to obtain protection in the U.K.”
However, a no-deal Brexit is likely to have much larger implications on IP across the U.K. and the EU for freelancers. Freelancers in the U.K. who have been working on filing IP applications in the U.K. must take note, regardless of whether the company they are working with is British or EU. The government’s published technical notices on no-deal Brexit relating to trademarks state that for all registered European Union Trade Marks (EUTMs) the Intellectual Property Office will create comparable U.K. trademarks. These comparable U.K. rights will have the same filing dates as recorded against the corresponding EUTM. They will be fully independent U.K. trademarks that can be challenged, assigned, licensed or renewed, separately from the original EUTM.
In relation to copyright, the protection of copyrighted works in the U.K. will largely remain unchanged. However, there is likely to be restrictions and implications on Portability of Online Content Services for U.K. nationals when the travel to the European Union.
Tip to remember: Keep your eyes and ears open and be sure that you refile your pending works following Brexit, and of course, be ready to prepare for the no-deal scenario.
No-deal Brexit: What does it mean for the freelancers?
How likely is a no-deal Brexit? As far as the U.K. government is concerned, they’ve made it clear that delivering a deal with the European Union is their top priority. However, this is not a guarantee, so although unlikely, it is still important to consider the implications of a no-deal Brexit. It’s worth remembering that a no-deal Brexit remains the default option until a deal has been agreed.
In the event of this, the predictability of the effect on freelancers is much more difficult. Some of the effects of a no-deal Brexit would be:
- The transition period for Britain to leave the European Union would disappear and it will face a “cliff edge” situation. Almost everyone is agreed that this would be a far more volatile option
- Freelancers and contractors may lose sizable EU clients as the uncertainty around trade laws and potential changes will ensue.
- Relocating would be far more difficult for U.K. freelancers due to unpredictability around how a new visa system will work.
- Additionally, customs may rise harshly high and increase the cost of the stock materials.
Tip to remember: This scenario seems to be less likely as it will be less predictable for both the U.K. government and the EU. However, if it does end up happening, there may be a small time period with more extreme effects on your numbers. Don’t panic though, the short term effects are likely to be worse than the long term.
The takeaway: Take a deep breath and do your job
While waters are still very muddy and no one has a crystal ball to see into the future, it’s very clear that no-deal scenario is the worst option for the freelance community as it will affect flexibility and confidence in the U.K. economy. The next week will be a very important time in the Brexit process, there is potentially a long way to go -- if Article 50 is extended -- and we should not forget that markets and systems tend to adapt to new conditions. It's in our Darwinian nature. So, even if it seems that the post-Brexit era will be less kind for self-employed and freelancers, this will gradually become normalized, as the new status quo matures, learns and evolves.PeoplePerHour, the leading freelance marketplace in Europe, has released a dedicated microsite with series of Brexit guides for freelancers and small-business owners. Additionally, you may find other useful Brexit resources and news that will help you stay on top of the topic.