August 3, 2016 – In the immediate aftermath of the Brexit vote six weeks ago, London-headquartered search firm Hoggett Bowers mobilized 80 senior executives from a range of sectors to begin taking stock of Britain’s historic vote to sever its 43-year relationship with the E.U.
On the search firm’s mind: What is the likely impact of Brexit on hiring? That question has been the singular focus of a global recruiting industry on edge since the vote was tallied on June 23. Feedback from this client group, in some ways, might seem surprising to us on this side of the Atlantic – but it is reflective of a national psyche that doesn’t give up easily and simply carries on.
This essential nature of the British people and the global businesses they run is reflected best in GlaxoSmithKline’s just-announced decision to invest more than $350 million in new investments at three drug manufacturing sites in Britain – despite Brexit. The move was daring; it signaled confidence, some might even call it patriotism, in a badly bruised nation.
Taking a Stand
GSK’s CEO, Andrew Witty, argued vociferously against Brexit before the referendum results forever altered the business landscape across Great Britain. But leadership is all about taking a stand, and so it is that Mr. Witty made this investment based on the belief that the U.K. remains an attractive place to headquarter a company, with skilled workers at the ready, scientists in their labs and a low tax rate.
In fact, new drug sales and currency gains from the falling pound, the company said just last week, could pump up its full-year results nearly 20 percent. Britain, of course, is vital to the very existence of GSK – the country accounts for nearly half of its worldwide research and development and a third of its manufacturing.
By coincidence, in one of the biggest search assignments underway in British business at the moment, Egon Zehnder has been tapped to find Mr. Witty’s replacement. Who the search firm offers up to the GSK board, and who the board chooses, will likely impact the global pharma giant’s future more than any other chief executive recruitment in the company’s history, this according to recruiters following the search.
Whether the incumbent remains convinced that Britain is best for luring, accessing and retaining top scientific talent in what could become a disruptive drug regulation environment is anyone’s guess. Whoever the CEO is, he or she will need to not only reinvigorate a massive team of people, but also redirect and salve the culture of a winning company that might be dealing with intense headwinds, and diminished global status, in a post-Brexit England. But for the moment, the company’s employees & investors can only do what they do best – wait and see, and carry on.
Indomitable British Spirit
According to Bianca Coulter, CEO of London-based global life sciences leadership provider Coulter Partners, what’s happening at GSK is indicative of the spirit of British business in general. And she, like many others, firmly believes that no one should count out British business just yet.
“We are taking the threat of Brexit very seriously,” said Ms. Coulter. “But at the same time it is business as usual.” That sentiment is exactly the feedback that Hoggett Bowers heard from its focus group. “Until Article 50 is invoked and negotiations start, the impact is unclear,” clients told the search firm. “Therefore the message is ‘carry on as usual.’”
With tighter controls on immigration, according to the Hoggett Bowers survey, the U.K. talent pool will soon be smaller, and this will make it more difficult to fill roles. Salary and wage escalations could then occur in areas of talent scarcity. If the pipeline of labor from the continent were to dry up, U.K. recruiters will be in the unenviable position of not being able to satisfy their clients’ talent demands. How the U.K. confronts this challenge could very well determine the extent of the long term impact that Brexit will have on British business.
One thing everyone seems to agree on: the next six month period will be a time of retrenchment. One recruiter likened the current environment to a slow moving train – and until the exit is officially triggered and the seeds of a deal between the U.K. and Europe are firmly planted, hiring freezes will be effected, leaving very little room for search firms to maneuver.
Brexit Not a Foregone Conclusion
Ms. Coulter said she does not see full exit from the European union as a foregone conclusion. But she does agree that “any degree of withdrawal from the E.U. may have a negative impact on the life sciences sector” in the U.K., her specialty.
She is hopeful that good sense will prevail, and with good reason: The sector pumps nearly $90 billion into the U.K. economy annually and supports some 220,000 jobs.
“We see freedom of movement as an essential platform for the economic development of Britain, Europe as a whole and particularly the life science sector,” said Ms. Coulter. Instability and uncertainty will only undermine investment, she said. “Research projects are already seeing some European funding withdrawn.”
Brexit’s Impact on London & Global Talent Acquisition
“In our view, the U.K.’s decision to exit from the European Union could have a potentially devastating effect on how companies with major business interests in the country deal with their senior-level talent acquisition strategies. We take an in-depth look at how companies and their external recruiting partners are tackling critical hiring issues and offer up some surprising predictions.”
— Scott A. Scanlon, London Global Crossroads Report Editor-in-Chief
In fact, the life sciences sector receives research funding from the E.U. in excess of $1 billion a year. The concern now is that U.K. scientists could be isolated and their influence on medicine reduced.
But what concerns Ms. Coulter and her clients most is that the U.K. could become “a less desirable destination for inward investment” – and to that end, some U.K. headquartered companies are already considering re-domiciling elsewhere, she said.
Coulter Partners itself has healthy expanding operations in the E.U., primarily in Denmark and Germany, as well as in Switzerland. The firm made the very prescient move to set up operations in the U.S. right before Brexit, making it, as Ms. Coulter said recently, “well-placed to absorb any shocks that Brexit will cause to the U.K. economy.”
U.S. Seen As Business Hedge
Ms. Coulter has not been alone among highly specialized and expanding recruiting boutiques seeking refuge – and a business hedge – across the pond. Call it a British invasion with a modern twist. As the fallout deepens in the post-Brexit world, the U.S. is looking more attractive to search firms headquartered in London who find they can just as easily expand their global search platforms to America. Here is a look at just a few of them taken from the Hunt Scanlon Media newswire archives:
- SRi (Sports Recruitment International) just expanded to the U.S. with the appointment of Steven Moser as a consultant. Mr. Moser becomes the first SRi appointment to be permanently based stateside, expanding the firm’s global reach that already includes bases in Australia, Canada, China, Germany, Singapore, Switzerland and the U.K. He is based in Phoenix;
- London-based executive search firm Nolan Partners expanded its operations to North America with the opening of offices in Los Angeles and New York and the appointment of Chad Biagini as managing director of North America;
- U.K.-headquartered Expand Executive Search recently launched its first U.S. office, establishing a presence in New York City. Executive search consultant Ollie Shipp heads the new location, relocating from the U.K.;
- London-headquartered executive recruiting firm eg.1 opened is first office in the U.S., establishing a location in New York City. The firm is led by Victoria Gumbley. She has assumed the title of vice president of North America, relocating from London to New York;
- London-based executive search firm Erevena opened its first U.S. office, establishing a location in San Francisco. The office is being led by partner Terry Shaw and principal consultant Max Levy, who relocated from London. Further additions the office are expected in coming months.
Others, like Leathwaite and Marlin Hawk, established beachheads very early on in the U.S. What seemed like a simple plan to cast ashore years ago is now seen as one of the most important business moves either could have made.
Leathwaite, a mid-sized human capital solutions specialist focused on recruiting financial services and technology leaders, expanded to the U.S. market some 13 years ago. Today, the majority of its business comes from American-based clients, to whom it offers up interim talent, management consulting services and executive search solutions to a growing cadre of clients. Leathwaite, like Marlin Hawk, underpins its business lines with on-demand market intelligence. Both firms believe this gives them a distinct competitive edge in an overcrowded U.S. market.
In a survey of senior financial services professionals the firm conducted last week, the overwhelming response was that their jobs would not be moving from London in the foreseeable future due to Brexit. “No one is being pressed to make decisions at the current time,” said James Rust, a Leathwaite founding partner. “The message from organizations is clear: Companies are taking their time to assess … prior to making any fundamental changes to their organizational strategy.”
Key Concern: Retaining Talent
Nevertheless, this doesn’t mean companies aren’t concerned about their ability to retain their top talent. According to Leathwaite’s recent survey, nearly a quarter of respondents said they had ‘no plan’ or ‘not a strong enough’ contingency plan in place for Brexit. While those companies appear willing to sit tight, there is no question now that their plans are active and evolving.
The other firm that had an early jumpstart in the U.S. is Marlin Hawk, a global leadership advisory and executive search boutique offering talent management and leadership advisory solutions services that include executive search, market intelligence & benchmarking, interim management, project services and leadership assessment. It opened its first American outpost in 2010. Today, from offices in New York and San Francisco, the firm seems to have the U.S. covered coast to coast.
Mark Oppenheimer, the firm’s chief commercial and innovation officer based in New York, is an outspoken advocate of recruiters needing to think more outside the box for clients. Mr. Oppenheimer prides himself on one thing, innovation, and in countless interviews he’s made it abundantly clear that the rulebook that underpinned the old headhunting industry for decades is now woefully obsolete. His platform: technology, market intelligence, science and transformational business practices.
Jonathan Hime, Marlin Hawk’s group managing partner based in London, said that like it or not, Brexit is in the offing, “along with at least a bit of economic turmoil.” He said that “for the immediate time being, all that’s sure is a dose of uncertainty and instability.” That makes his past decision to set up shop in the U.S. gratifying.
Brexit, he said, “is a challenging situation for the executive search industry,” but “challenges also bring opportunities,” he added. “It is a reality that our firm and the U.K. as a whole will need to embrace.” The good news, he said, is that British business is “adaptable and resilient; that’s a lesson of history.” Around the globe, he added, “world leaders will wish to trade with us, and we should absolutely not shut our doors to them.” After all, he said, “it’s primarily the political element of the E.U. that’s unpopular, not the economic one.”
For now, said Mr. Hime, the key is for the U.K. to forge more commercially competitive trading links beyond Europe, without being hampered by E.U. bureaucracy. “The U.K. can sink or it can swim – and the former is alien to the British psyche,” he said. “We all need to focus on positives and fresh opportunities, and the executive search industry can play a crucial role in helping the U.K. adapt to this new landscape.”
This concludes our two-part look at the ramifications of Brexit on the executive search industry.
Next month, Hunt Scanlon will publish a landmark report on Brexit. After a series of extensive interviews that began last spring, our analysts have concluded that a crisis is slowly unfolding at executive search firms across London due to the U.K.’s decision to leave the E.U. The crisis is most notable among recruiting firms within the financial services sector, but many other industries such as global life sciences and energy are also being affected. Both the Big Five and boutique executive search firms are now fixated on the meaning of Brexit for their businesses in the months and years to come. We take an inside look at the short and long term impacts.
With Asia and Europe to its east and the U.S. and the Americas to its west, London has long been a critical hub for global business. A close look at this dynamic landscape shows why. London has spawned a gigantic entrepreneurial, culturally diverse workplace environment that now requires an enormous number of trained, well-educated business professionals – who can travel unimpeded. But London is dealing with a talent shortage due to Brexit, and that might mean escalating wages. According to talent acquisition specialists and executive recruiters who crisscross this city every day, those shortages will impact competitiveness and productivity to levels not seen here before.
As the struggle to find the right talent becomes even more difficult – and with Brexit now a reality, London itself is under pressure as a premier ‘talent destination’ to attract the best workers that will drive business forward. This is a must-read report for anyone remotely interested in global talent acquisition strategies and what Brexit means for you. To pre-order your copy with a 20 percent discount: Brexit’s Impact on London & Global Talent Acquisition
Contributed by Scott A. Scanlon, Editor-in-Chief, Hunt Scanlon Media