What would a No Deal Brexit mean for contractors and the self-employed?

There has been plenty of debate over the past year over what would happen in the event of a ‘No Deal Brexit’. We discuss what this might mean for contractors, freelancers and the self-employed in the UK.

Prime Minister Theresa May’s draft Brexit deal is losing support quickly, increasing the likelihood of a No Deal Brexit for the UK. This would have drastic implications on the movement of people and services – impacting the livelihoods of contractors and freelancers in the UK and Europe.

What does ‘No Deal Brexit’ mean?

A No Deal Brexit would occur if the UK and the EU are unable to reach a withdrawal agreement. In this case, the 21-month transition period following the official exit on 29^th March 2019 would be scrapped.

This means stakeholders would be forced to suddenly respond and adapt to an instant crash out of the EU. Businesses, public organisations and consumers alike would have to adjust to a new state of being. Whilst this is not the scenario Mrs May is hoping for, she still has to come up with a plan of action in case a No Deal scenario takes place.

There are potential ramifications to a No Deal Brexit, including tariffs on imports and exports, delays at borders and uncertainty over the rights of EU nationals in the UK and Britons in the EU.

How would contractors, freelancers and the self-employed be affected by a No Deal Brexit?

As highlighted by IPSE, Brexit is a big issue for self-employed professionals and freelancers. For them, the state of the flexible market is one of the leading concerns of the UK leaving the EU.

The uncertainty centres on British contractors’ ability to take contract roles in EU countries. It’s quite common for IT contractors in particular to accept contracts abroad in countries like Germany, the Netherlands and France where rates can be higher.

Contractors and freelancers are right to be wary; off-book workers are likely to be among the first budget cuts made in the wake of a No Deal Brexit. To add fuel to the fire, many big financial, tech and manufacturing firms – many of whom would engage contractors – have threatened to move operations out of the UK if a suitable agreement with the EU cannot be reached.

Consequently, thousands of both permanent and contract roles would move out of the UK. In a No Deal Brexit, British workers and contractors can’t just relocate to new headquarters in Europe; there could be harsh restrictions on the movement of people, too.

The free movement of skilled professionals is one of the draws of being a contractor or freelancer. Losing the freedom of choice to take a contract role abroad – should the opportunity arise – is one of the key reasons many independent workers don’t want a ‘hard Brexit’.

A No Deal Brexit would mean the UK reverts to World Trade Organisation rules

Without specific trade agreements in place, the UK would initially have to use WTO rules for trade with the EU. WTO rules do not cover the trade of services to the same extent as they do goods, so this remains a big question mark.

Naturally, most contractors and freelancers fall under the provision of services; therefore further planning should happen – regardless of the Brexit outcome – in order to satisfy this concern for contractors.

In a No Deal Brexit, the everyday running relationship between the UK and EU (up until 29^th March 2019) would come to a screeching halt. Both the UK and the EU would face astronomic costs to try and deal with rapid change and uncertainty.

In the short term, this could lead to an increased need for short-term resources and this is where contractors and freelancers would benefit. However IPSE has said that with a reduction in long-term economic output, the bonus would be short-lived for contractors.

What is Theresa May doing for contractors?

Theresa May’s draft deal ‘Chequers’ seems to have left out freedom of movement for people and services, instead focusing on goods and capital.

The latter are crucial to Britain’s economy and to maintain a positive political relationship with the EU. However Chequers seems to fail to effectively consider the 4.8 million contractors, freelancers and self-employed professionals in the UK. That’s over 15% of the workforce who are unsure what will happen to their careers post-Brexit.

Next steps for Brexit

The ‘soft-Brexit’ draft deal has not garnered enough support; instead Theresa May has been faced with a flurry of backlash and resignations, including Boris Johnson – former Foreign Secretary.

With the Brexit plan facing substantial opposition from the Conservative Party, Mrs May will be attending a series of summits with EU leaders in the autumn. This will hopefully smooth out an agreement which both British Parliament and EU negotiators can agree on.

What are your predictions on the outcome of Brexit for contractors and freelancers? Share your questions and concerns with us by leaving a comment.

You may also like to read:

• A look into self-employment in the UK
• 5 minute contractor guide: the 2019 Loan Charge