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uncertainty to fill
both low-paid and
specialist roles as the
devaluation of sterling
reduces the value of
wages and motivates
these employees to
migrate, thus making
businesses extremely
vulnerable to change.
Regional wage
inflation and contract
terms – Businesses
could struggle to
fill vacancies vital to contract delivery and may end up
having to pay considerably more for the right people in
certain regions. Since labour costs are the largest cost
when assessing contract performance, this could have
enduring e ects. Equally, existing contractual terms
reflect favourable rights for workers which could create
confusion in the future.
Training-up the UK - There are many good examples of
employers increasing their investment in apprenticeships
and CSR initiatives, including companies such as TCFM
creating partnerships to enable the disabled and longterm
unemployed get back in to work.
Five key policies which have a real impact and will help
us thrive post- Brexit are:
• Simplifying tax: the formation of one simple earnings tax
through the alignment of National Insurance and Income Tax.
• Infrastructure: investment in ‘shovel-ready’ projects, in order to
secure quicker wins.
• Skills: reinstating the two-year post-study work visa to help
address the skills shortage.
• Boost productivity: the annual allowance investment being
increased to £5m for five years.
• Patient capital: the consideration of radical steps to increase
pension scheme investment in patient capital.
With under 40 days to go until we o icially leave the EU,
the Prime Minister has no option but to prioritise policies
at home which will help the UK insulate itself from a
dramatic Brexit. Whatever the final outcome, we believe
that British businesses will continue to adapt, invest and
expand. It’s important to remain optimistic.
THE TFM SUPPLIER’S VIEW
MARTIN REED,
CEO, INCENTIVE FM GROUP
Within the service industry, there has, quite rightly,
been a lot of discussion about the potential skills and
people crisis that might be a result of any Brexit deal.
In particular, there is much speculation on the impact it
will have on finding recruits for the lower paid, nonskilled
roles. There is no doubt that in recent years the
industry has struggled to recruit homegrown workers
and has come to rely heavily on European workers. The
uncertainty does not help and neither does the fact that
whatever the outcome of negotiations, there will likely
be tougher immigration rules, which will make it harder
for firms to hire migrant labour, and make those migrants
already living in the UK consider whether they should
continue living in the country.
There is another real area for concern, however, that
is getting fewer headlines and that is the supply chain
and its associated rise in costs, which will inevitably
impact our sector. New research from the Chartered
Institute of Procurement and Supply (CIPS) indicates that
nearly one third (32 per cent) of UK businesses with EU
suppliers have already increased their prices as a result
of the June 2016
referendum vote to
leave the EU. This
is understandable
as they have little
choice if they are
to protect their
profit margins and
remain solvent,
whilst consumers
will ultimately
decide if they want
to swallow the extra
costs or not buy.
In service sectors
such as facilities management, however, I fear that
it is the suppliers that will bear the brunt of these
increases, which may end up being catastrophic in an
industry known for its low margins. Whilst labour is
by far the biggest cost for companies in the sector, we
are also responsible for the purchase of a wide range
of consumables, such as cleaning products and toilet
paper, which can run into tens of thousands of pounds.
For our mechanical and electrical maintenance service
business, Incentive Tec, the cost of equipment and parts,
for example for heating, venting and air-conditioning
systems, is considerably higher.
The majority of these products are manufactured in
Europe, o en Eastern Europe, where production costs
have traditionally been lower. Whilst nothing is certain,
it makes sense that these products will become more
expensive and possibly subject to additional customs and
tari s.
So, who will bear these increased costs of products and
people? In simple terms, it depends on the terms of your
contracts.
The real impact will be on companies that o er fixed
cost contracts that operate over a number of years.
Generally, these types of agreements contain strict
clauses about what, if any, increases in costs will be
covered. A raise in UK VAT, for example, would be covered,
but I doubt there are many Brexit clauses. Of course, there
are some clients who will feel morally obliged to at least
contribute towards this, but equally, there will be others
that won’t. With margins in some sectors on low single
figures, this could be, at best, damaging.
Of course, it might be possible to argue that Brexit
triggered a change in legislation that could not reasonably
FM CLINIC
Satvir Bungar
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Martin Reed
ADVICE & OPINION
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