What Brexit might mean for the UK’s relationship with Poland – and its effect on outsourcing

Posted: 08/10/2016 - 02:50

With the United Kingdom set to leave the European Union, the impact on the Polish outsourcing market looks likely to be both positive and negative. The full extent on outsourcing is yet to be determined, but some predictions can be made based on various scenarios.

If Polish talent leaves the UK

Since Poland joined the EU in 2004, around 2 million Polish workers left to reside and work in other countries, many of them to the UK. It is estimated that 850,000 Poles now live in the UK, with Poland's National Bank approximating that Poles working and living in the UK send home more than $1 billion (£728m) a year.

Once these Polish workers and residents leave Britain, there is a real threat that the lack of a specialist migrant workforce (from engineers to C-level) may contribute to a British economic slowdown. Most migrants currently residing in the UK hold positions in construction, IT, engineering, and the healthcare sector; without this the UK could see a vast skills shortage. If Polish workers return home in large numbers (and don’t go to neighbouring UK countries like Ireland), they will bring their skills and qualifications back to Poland. This move could also bring back many younger workers, some with university educations, to fill the current Polish talent shortage.

In this scenario, Britain will need 75,000 more programmers and IT specialists, which would open the recruitment market for Polish IT experts and outsourcing.

If UK loses its close relationship with Poland 

Alongside this, looser ties between the EU and the UK may lead to the deterioration of business relations. If this happens, it is likely that Poland and other European countries may get closer together to prevent a ‘domino effect’.

A closer relation between Poland and the EU will create more outsourcing opportunities from other EU countries, potentially replacing the UK. The UK Treasury estimates that leaving the EU will drop Britain’s trade in goods and services by between 9% and 24%, a significant decrease. Whilst the UK was a member of the EU, its trade increased by 76%, making its market much more competitive. The EU’s budget for supporting Britain will be cut, meaning that Poland - already one of the biggest EU beneficiaries - could be likely to get more funds. More money will therefore be available to spend on funding companies, working on innovative solutions, and establishing R&D departments.

The outlook for outsourcing?

However, for outsourcing in particular, the UK withdrawing will create a lot of uncertainty. We can presume that employment costs will be higher, limited movement will result in restricted access to low-cost labour, and dissimilar privacy laws will make outsourcing more difficult to implement between the UK and other countries. Whilst the precise effects of all this remain to be seen, the ‘settling down’ period alone will cause a slowdown in the outsourcing market.

Further relevant to [my company] Future Processing, a company which focuses on developing software for UK and EU companies, as a result of changes to EU/non-EU law, technology may need to be adjusted as laws and regulations change. Banks will adjust or rewrite their programs to comply with the new rules, giving neighbouring counties the chance to get business from outsourcing, since the UK will likely suffer a shortage of IT talent.

The outsourcing industry’s view of Brexit

Regardless, the outsourcing community will miss the UK. The National Outsourcing Association (NOA) released a statement which presented some opinion poll findings. The NOA asked various British outsourcing industry members to express their opinion on Brexit, especially since the UK is currently the second largest outsourcer (and outsourcing greatly supports its economy). The NOA’s results showed that 73% of the UK outsourcing industry didn’t want Britain to leave the EU, with the top priority being to “preserve valuable outsourcing and trade relationship” (35%) and to “keep UK exports strong” (15%). Some 34% stated the EU opened far more doors for the UK, and that leaving would be reckless.

The immediate view is unpredictable

Of course, nothing will change drastically overnight, and some of these changes will take years to be fully felt. New agreements, including VAT calculations and rate of currency, will all take some time to decide. Nonetheless, we’re looking at a few years of an unpredictable economy and price confusion before the dust settles. On the other hand, some companies might want to rush their investments to use the current scheme as long as it lasts.

Although it’s only possible to second-guess what will happen at this stage, what we do predict is that Brexit will have a vast impact on the outsourcing industry. Right now, only time will show how many of the predictions will come to pass, with a lot resting on what deal the UK will make with the EU after its withdrawal.

What we do know for sure is that some aspects will require a lot of getting used to, with the referendum’s results showing a clear divide between business and consumer, and old and young. Whatever the end result is, some sort of compromise will need to be reached.

About The Author

Jaroslaw Czaja's picture

Jarosław Czaja is Founder and CEO of Future Processing, a high-quality Polish software development outsourcer. As an Ernst & Young Entrepreneur of the Year Award Finalist, Jaroslaw is responsible for the day-to-day running of the company, as well as its growth strategy.