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What Impact Will Brexit Have on the Security Industry?

While the EU referendum asked a very simple question, the ramifications have been anything but. It’s still unclear whether we’ll even reach a deal to shape our relationship with the EU once we have left and that threatens to throw UK businesses of every size into disarray.

All that uncertainty has posed a number of complex questions about the implications of Brexit and made it very difficult to predict exactly what the consequences will be. Mike Smith – senior director of Company Debt, one of the UK’s leading insolvency practitioners – predicts there will be pros and cons of leaving the EU for every business, but here, asks specifically ‘what impact do we expect it to have on the UK’s security industry?’

The security industry and the wider economy

The wider economic consequences are not forecast to be favourable in the shorter term while firms adjust to a new way of working. The Treasury estimates that leaving the EU will damage the UK’s economy to the tune of between 3.4 percent and 9.5 percent of GDP by 2030, and it’s thought those predictions are far from unreasonable. Given the economic fallout of the decision, it’ll probably come as no surprise that the majority of businesses of all sizes were in favour of remaining in the European Union.

Damage to the service sector

According to figures from the Organisation for Economic Co-operation and Development (OECD), the UK is the world’s second largest net exporter of services, with the security industry very much a part of that. Most existing trade deals with the EU also require the free movement of people and common regulations. After Brexit, the EU will have to negotiate access to the European single market and that could put it at a disadvantage when compared to its EU rivals. The result is that Brexit could make life much more difficult for security businesses that export services from the UK.

Access to labour

One of the primary political arguments for Brexit was to regain control of our borders. The UK security industry relies heavily on labour from the EU. In fact, of 371,266 licenses that have been issued by the Security Industry Authority (SIA), just less than 15,000 of those have been to holders of EU passports. By limiting the number of people that can come into the country from the EU, security businesses in the UK fear they will struggle to hire the employees they need. The dearth in the supply of foreign workers is also likely to push up the cost of domestic employees, thereby driving up the costs of businesses in the sector.

Additional import taxes

One of the most significant advantages of the UK’s membership of the EU is the ability to sell goods and services freely to consumers within the EU without having to pay additional taxes to import those goods. Free trade agreements also mean that any tariffs are waived, which further helps to maintain the competitiveness of UK security firms. The vote to leave the EU puts that at risk and we will have to wait until the terms of the UK’s withdrawal from Europe are finalised to see what solutions, if any, are put in place.

The prospect of watered-down regulations  

EU legislation has had a significant impact on employment rights in every sector, including the security industry. Equal pay, maternity rights, health and safety, TUPE protections, public procurement and the right to information and consultation have all been influenced by the EU. Being a reluctant regulator in the past, there’s a real risk that the UK government could oversee a watering down of employment regulations. While that may lower costs for British firms, it will also reduce the level of protection UK security workers receive.

Research and innovation

The EU has tripled its research and innovation budget over the last decade while UK investment in the same area has fallen to just 0.55 percent of GDP. That’s less than the 0.8 percent average among other advanced nations.

The UK has secured around 16 percent of all EU research and innovation funding, which includes up to £100m of research and development in ADS sectors. Leaving the EU will create a funding shortfall for innovation that the UK government acting alone will not be able to fill. That will lead to an inevitable reduction in research and entrepreneurial activity in the security industry.