Dear Joe
Congratulations on becoming our new MP! As promised, I have prepared some information for you and your colleagues, which will pinpoint issues with the current Brexit Trade and Co-operation Agreement (TCA). The TCA is a major bottleneck to businesses. I appreciate MPs do not have time to read over 1700 pages of the Brexit TCA. The Cross Border Services Workgroup, of which I am a member, analysed the TCA for the House of Lords UK-EU Services Trade Committee in 2021 when the treaty was first published. I also submitted individual evidence regarding my sector and business, software services, which I mention in the references.
My background
I am a Geordie, based in Northumberland, who used the ‘Auf Wiedersehen Pet’ model to start my career in Europe. I studied Spanish, Portuguese and French and switched to an IT career via programming diplomas at Newcastle College and an MSc in Computing Science. I subsequently acquired fluency in Dutch and German. I went freelance, taking projects in the UK, The Netherlands, Germany and Switzerland. As a freelancer, I am responsible for my own business development and sales. I developed a network of direct customers, project brokers, agency contacts and knowledge of local freelance markets.(You will find references to interviews with me on Glasgow EU Livestream with Jenny Wilson in my Lords UK-EU services trade report if interested to know more).
The last government did not consult with people in industry before negotiating the TCA. Its provisions fail to reflect the way consultants work in reality. I hope you and the new government may be able to address some of these issues. I would be grateful if you could raise my points with the DTI and David Lammy at the Foreign Office. I would be happy to talk to any MPs, departments and committees if anyone would like more information.
Summary of the TCA for service professionals
British nationals in certain professional categories, such as healthcare, IT, engineering, marketing and finance may work in several EU countries but not all under the TCA without a permit (Article 132 and Annex 22). I will use computing as my example sector.
The TCA divides computing service professionals into two categories:
- Contracted service suppliers (CSS) – employees of a company. eg staff of Accenture who must have three years experience and a degree (or equivalent)
- Independent professionals (IPs) – freelancers, who must have six years experience and a degree (or equivalent)
(Article 143, p.176-177)
These professionals may provide services on site in EU countries for a cumulative period of 12 months (The 90 in 180 days restriction rule does not apply to them during this time).
The projects must be done as freelancers or consultants, so any payroll-based models (cf IR35) are not permitted. These include payroll models in Holland (Wet DBA) and the German ANU (Arbeitnehmeruberlassung).
In reality, a lot of freelancers work on payroll models; some customers insist on that. They are therefore blocked from a large part of the market.
Most European countries, including France, Germany, Portugal, Luxembourg and The Netherlands, signed up to this default model for on-site work, with a few exceptions. eg Belgium and Denmark require work permits for freelancers. Annex 22 lists each service industry sectors in turn in detail.
In recruitment generally, where a work permit is required, recruiters have to advertise the role for 8 weeks in the EEA and prove that no suitable candidate based in the EEA was found before a third country national may be considered. UK professionals are blocked from applying for contract work where a permit is needed; contract recruitment has a fast turnaround. Staff are required quickly. It takes 2 weeks – 3 months to process work permit applications depending on the EU country. Contract terms also demand a consultant has the right to work or fines ensue.
The TCA does not apply any quota restrictions on the number of professionals who can work under this agreement. As many as are required to carry out the work are permitted.
Remote projects should be feasible, except where there are projects with higher security requirements which would require a candidate to attain EU security clearance or similar local equivalent. Vice-versa, remote projects should be feasible under the TCA for EU nationals working for UK based customers, unless these require SC clearance and are restricted to UK territories due to higher security requirements.
The EU and UK signed up to Data Equivalence in the Brexit trade deal. This means the EU considered the UK an equivalent territory regarding data protection and guarantees on that where any work is carried out remote.
EU service professionals in the UK
Likewise, EU professionals are permitted to work in the UK without a permit for a cumulative period of 12 months.
Problems with the TCA
Agency work
The deal mentions business to business projects and freelance contracts only. In reality, many small businesses and freelancers use recruitment agencies to source projects. We do not have teams of account managers and sales staff to support us, unlike large corporates such as Accenture.
Participating in an official tender is very time consuming and may require not only individual services, but teams of IT staff, which we do not have. A recruitment agency is therefore a vital source of projects for us.
Some clients use a dedicated contract broker for recruitment who recruits for government, banking and private sector roles to avoid chain responsibility.
Other clients use conventional recruitment agencies such as Harvey Nash, Michael Page, etc.
The Brexit TCA should explicitly allow any project work sourced via brokers and recruitment agencies.
The cumulative 12 month service period
This maximum term does not work for many services professionals who may be engaged on longer projects. For example:
- cloud migration projects typically run for over 12 months.
- many consultants are engaged on rolling renewable contracts, which run with three month extensions for up to three years.
The Earl of Clancarty asked the previous government why a 12 month period was chosen having read my report to the Lords UK-EU services committee. The UK government based this on the EU-Japan deal and though it generous.
A Japanese professional may relocate to Europe for an assignment and spend a full year onsite, whereas for UK professionals, it is simple to return home at weekends. Our geography promotes a longer and closer relationship while we maintain our home in the UK. The 12 month restriction devalues us as marketable candidates and reduces our viable shelf life.
Post-pandemic period
Many projects have become hybrid with the easing of pandemic restrictions, which has highlighted the full extent of problems with the TCA. Full remote work as the norm hid many of the issues with the TCA and brand damage. Since the pandemic, I have worked mostly remote for customers in the UK and Germany.
Adverts continue to state: EU citizens only, EU residents only.
Recruiters have told me directly that they have adopted a policy to avoid British candidates, even for what would be a permitted business to business freelance project (not on payroll models) under the TCA. They either ignore the terms of the TCA or do not understand them. I periodically reference my professional status in the TCA when applying for any projects but feel these are ignored. Why bother when you can recruit an EU citizen with no red tape attached?
Even project adverts for fully remote work state ‘must be EU citizen’ or remote from the EU only.
I was engaged in a tender with a nearshore IT services company for new fully remote project work for a German IT services customer in May-June. Despite matching technical requirements, I was rejected purely on my UK citizenship. The project was worth around £50,000, which would have brought in c. £10,000 corporation tax.
Customers such as large IT services companies sometimes reject UK based candidates for fear of laptops becoming stuck in customs processing.
Barriers to trade under the current EU visa systems
Visa type permits, which are an option for professionals who wish to work in one EU country outside of the TCA, usually require an address/residence in a country. Not all freelancers can physically move to reside in another country for a long period due to family commitments or costs. A visa may be granted based on your potential to win projects, but this does not guarantee that you would win these. The British brand has been damaged by Brexit and this puts customers off us as candidates even when the UK citizen resides in an EU nation. I am regularly in touch with British nationals who live in the EU under the Withdrawal Agreement with rights to work in their EU country of residence. Some have been pushed by necessity to take contracts in the UK for work since EU recruiters do not wish to deal with them.
The EU Blue Card scheme does not apply to Freelancers.
The UK-Swiss deal
Liz Truss’s UK-Swiss deal is another problematic area. I have lost all my Swiss customers due to this deal. I responded to the Trade with Switzerland: call for input by the Department of Trade in 2022. The DTI was preparing to re-negotiate the UK-Swiss deal. I have received no feedback on my input.
When I worked on a project in Zurich in the past, with my former EU citizenship, getting a temporary work permit and residence permit was a mere formality once the offer of work on a project and some accommodation had been secured. Walk into a local council office (Kreisburo) with your paperwork, project contract and proof of address in Switzerland, be that a temporary studio, flat share or hotel, your passport and a photo, and that was it.
The post Brexit UK-Switzerland deal allows services professionals to work for a maximum of three months per year in Switzerland, and the definition of services or limited companies is limited.
Annex I of the UK-CH ‘temporary’ Agreement defines: a “service supplier of the United Kingdom” as “a national of the United Kingdom who is established in the territory of the United Kingdom.” In other words, UK citizens living in the UK are allowed to provide services into Switzerland, but UK citizens living anywhere else (including the EU) are excluded. This may not be intentional, but simply an oversight by the drafters. This means an airport chauffeur company based in France run by UK citizens could not provide services in Switzerland. My UK-based limited company could supply services – if part of a business-to-business deal – for up to three months, but my Europe-based British colleague, Chris, could not use his legal business entity to serve Swiss clients on site.
Liz Truss ignored the fact that most freelancers working in Switzerland work on payroll via an agency or even on behalf of a direct client, such as an IT service firm. This form of freelancing even has its own name in the German speaking world, Der Schweizer Model. This means a work permit will be required.
Thus British services freelancers encounter the same problem inherent in the Brexit deal where some European countries require work permits (Belgium, Denmark to name but two).
My experience with Switzerland pre and post Brexit
I learned German to cover the Swiss market: it took a couple of years at night schools to reach the standard needed. I networked and had built up a direct client list, which included a large German-Swiss IT consultancy from which I could source projects without a recruitment agency in the middle demanding an extra margin. The contracts specialist informed me that the board had decided not to work with British contractors on Swiss projects anymore, unless they already had the right to work and live in Switzerland, i.e. had moved there before the end of the Brexit transition.
This is because UK citizens are now “third-country nationals”. Despite the contingent of work permits allotted in the UK-Switzerland deal (for permanent and contract work), any Swiss canton can always refuse to grant a permit. This means that even if the IT services company is positive and makes an offer, they have to wait for permit processing and always face uncertainty that it will be granted. Businesses need certainty as do their clients.
Furthermore, many Swiss end-customers work using rolling contracts for longer projects: a contract is extended every three months.
This means the contractor has to reapply for the work permit to be extended, again the uncertainty being the Canton can always refuse the permit’s renewal, and in effect what would be midway through a project. This amount of red tape and risk really puts companies off.
This is a serious problem: there are many interesting and lucrative IT projects in Switzerland, especially in finance, telecoms and transport.
Swiss projects and earnings for HMRC via tax equalisation
Contractors who are not based in Switzerland for more than a year (or who are not outside of the UK for 12 months and then remain outside as non-residents for another year) are subject to tax equalization on their worldwide income by HMRC.
This means UK contractors on payroll are often paying a tax which is lower than the UK (depending of course on which canton they work and stay in as Switzerland has a single centralised tax system, and then its regional system per canton. Zurich has a lower canton tax than some areas. HMRC applies tax equalization, meaning that the UK contractor pays the difference to HMRC between what the tax was in Switzerland and the UK tax rate he or she would have paid, even when the contractor has paid tax revenues to the foreign authority, HMRC stood to gain extra revenues from this.
Swiss project rates are high as the cost of living is high. A hotel room can cost £200+ per night if you are not careful and reserve bookings. However, with improvements to the UK-Swiss deal, HMRC could potentially profit from British contractors.
Solutions – most serious points
- Include project work sourced via recruitment agencies and ‘payroll’ models in both the Brexit TCA and UK-Swiss deal.
- Ensure UK-Swiss deal allows UK nationals who reside in the UK and the EU or elsewhere worldwide, may take on Swiss projects using their legal business entities.
- Raise the cumulative service period to a more normal three years rather than 12 months which reflects the realities of projects we carry out. It is highly likely talented EU nationals can serve on niche projects in the UK, upskilling UK staff. Freelancers will usually leave when the project ends: this is a temporary situation, even if it lasts for a few years. It would be helpful to have a three year service period for the Swiss deal and EU deal.
- Persuading countries in the EU, which decided to deviate from the default TCA model to require work permits for UK consultants, to adopt the TCA defaults of permit free work so that more freelance projects and project work split between multiple countries for important clients become feasible again. (For example, a banking project for customers like ING may happen in multiple countries – NL, Belgium and Germany at the same time. Since Belgium requires a work permit for UK citizens, we would be blocked from applying, whereas we could work under the TCA in NL and Germany).
- Level up freelancers (IPs) and employees (CSPs) so the same number of years’ experience are required for both to trade. The current TCA favours large corporates.
- If the TCA is renegotiated and improved a potential publicity campaign eg via British embassies featuring:
a) Communications that Britain and British consultants are still open for trade to target recruitment agencies, customers and industry under the brand of neo ‘Cool Britannia’.
b) Publications on the TCA in simple summarized terms which are fast to digest. (The Dutch government had a good website – the Brexit Loket, but even these official pages point readers to the full TCA online, which no one has time to read in full).
Mending the brand damage
This is harder. The easiest way forward is for agencies and customers to choose a consultant from the EU where they have known clarity under permissions of the single market.
If recruiters do not understand the permissions of the TCA, they may fear fines and sanctions placed on them under EU legislation. A freelance project is not the same as a permanent job, at least not in the countries which permit 12 months on site without a work permit.
Before Brexit and the TCA, I would receive many calls from agencies and recruiters searching for candidates, even when I had not applied for projects directly. Nowadays, the phone has gone quiet.
I receive very few responses to project applications compared to the pre-transition. I have skills which are very much in demand for IT projects and many languages. Britain as a brand has really lost its influence.
Presence on site or in remote teams allows us to gain new knowledge which we can subsequently transfer to staff on British projects later on. I have used experience gained on European projects in niche skills to serve British projects, several in public sector. I have trained staff in these technologies and provided them with opportunities to grow professionally. We cannot underestimate the value of knowledge exchange in our relationship with Europe going forward.
As things stand for me personally, if there is no change in the Brexit deal, I will probably never re-gain my lost levels of business with European customers. I had a nascent market in Denmark having worked for a Danish IT services company. British freelancers can no longer work on Danish projects without a permit. The Brexit disaster ended any thoughts of ever expanding or taking on staff myself.
There are thousands of people in different service sectors with similar issues. Together, these mount up to substantial losses for us and the treasury.
Article 7 Citizens Directive
Under article 7 of the citizens’ directive, EU and single market members can restrict migration from Europe. Citizens who wish to spend more than three months in a country must prove they have a job or independent financial resources, plus comprehensive health insurance in order to stay.
If the government wishes to make Brexit work, it could adopt these controls on migration. The term freedom of movement is very misleading. I have experience of this where I have had to prove professional status. There is no room for freeloading. Theresa May could have used these controls at the Home Office in 2015 and did not. No member of the previous government could provide information as to why this was never used.
Most European citizens coming to the UK were in paid jobs, many in highly skilled professions, who would contribute to the revenue via taxation.
Labour could use these controls if it includes more flexible terms in the TCA. A controlled mobility framework would be advantageous for British services professionals. It could also reassure the public that we as a country control our borders.
What are your thoughts on that?
I look forward to hearing from you.
Yours sincerely
Jayne Hamilton
References
‘Dr Jayne Hamilton, IT Services Freelancer – Written Evidence (FTS0006)
(Future UK-EU relations: trade in services)
Future UK-EU relations: trade in services
Brexit Trade and Co-Operation Agreement,
Treaty Series No.8 (2021) Trade and Cooperation Agreement (30 December 2020) Jayne Hamilton talking Services & IT Freelancing with Jenny Wilson
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