And so started the tenure of our second female prime minister. She did not campaign for Brexit but she has made clear that she will see it through.
The creation of a department specifically to oversee Brexit headed by a campaigning Brexiteer underlines her resolve. David Davis has stated his belief that there should be no reduction in employment rights as a result of Brexit, a view shared by Robert Halfon, the new skills minister.
The burning question is what form Brexit will take. As the UK will be the first member state to leave the EU under Article 50 of the Treaty on European Union, we are entering into a period of uncertainty. However, there will be no immediate changes and the best advice is to wait and see how the negotiations pan out and which model the UK might choose to continue a different relationship with EU states.
For now, employment legislation will remain the same and indeed, it is unlikely that the government under Theresa May will make major changes in the medium to long term to diminish workers’ rights.
Given that Mrs May expects to address the imbalance between worker and boss, we can expect her government not to rush into repealing legislation that protects employees, however unpopular it may be with business.
Indeed, Mrs May appears ready to launch an attack on executive pay and the gap between the pay of those at the top and workers. To that end, she expects more transparency, including the full disclosure of bonus targets and the publication of ‘pay multiple’ data (the ratio between the CEO’s pay and the average company worker’s pay).
For financial institutions, both the FCA and the PRA have issued statements noting that much financial regulation currently applicable in the UK derives from EU legislation. This regulation will of course remain applicable in the UK in its current form until Brexit occurs. After that point, the UK Government may decide to amend it. In any event, much EU legislation was largely written by UK civil servants based on UK regulation and also reflects international standards which would continue to apply to the UK.
Firms will have to abide by their obligations under UK law, including those derived from EU law and continue with implementation plans for legislation that is still to come into effect. This position was underlined by Andrew Bailey, Chief Executive of the FCA, in a speech at the FCA’s Annual Public Meeting on 19 July 2016. Mr Bailey made clear that all the FCA’s rules continue to apply for the time being whether they originate from the EU or not. Further, the regulator will continue to implement EU legislation until the future is clear. The longer-term impacts depend, of course, on the negotiated position that is reached and the regulators will be working closely with the government on this. Mr Bailey has made clear that a priority is to seek access to the single market alongside trade agreements with other countries. In the meantime, the following issues are of particular concern to financial institutions:
- Passporting. This enables firms authorised under an EU single market directive to carry on activities in another EEA member state. This right is very important to many financial institutions who will want a negotiated position to include passporting rights.
- Data protection. The UK has implemented European data protection legislation (and a more stringent EU Data Protection regulation is due to be implemented in 2018). Going forward, the UK would need to establish itself as an adequate destination for transferring data across the EU and this will limit its freedom to make many changes. It is therefore expected that the UK will continue to comply with EU legislation in this area.
- Bonus cap and remuneration. This has been of course a major point of contention between the UK and the EU legislators. As stated above, it will be uncertain for some time whether the UK will have some flexibility in this respect but it is expected that the remuneration structure will remain as it is for some time. In any event, deferral and other restrictions on pay are locked in through the Senior Managers & Certification Regime, which largely tie in with EU rules. If the UK intends to carry on conducting business on an unrestricted basis with the EU post-Brexit, it will need equivalence of regulation so only tinkering is expected.
- Freedom of movement. The financial services sector is heavily dependent on the free movement of workers across the EU and firms may reconsider their UK operations if there were to be severe constraints put upon this. However, until the UK ceases to be a member of the EU there will be no change to EU principles of free movement and so it is expected that the employment of EEA nationals will continue as before for the time being. Indeed, any action at this stage to limit the employment of overseas nationals is likely to fall foul of discrimination legislation.
Further information about the impact of Brexit on employment rights can be read here: