University graduates leaving UK cities for London

10 August 2018 Consultancy.uk

With Brexit threatening to redraw the ability of firms to draw on talent pools from the EU, while high employment and an ageing population make filling roles a challenge, the UK’s cities are collectively battling a brain drain. While 51% of young adults in London are considering leaving in coming years, the city is doing its best to battle this, absorbing talent from other UK cities in the process, while the North West is the region most effectively combating this trend in turn.

The concept of a brain drain is nothing new, as graduates have been exiting the area they obtained their degree in to seek better paid work elsewhere for decades. In 2005, for example, it was found that more than 1.44 million graduates had left the UK to look for more highly paid jobs in countries such as the United States, Canada and Australia, far outweighing the 1.26 million immigrant graduates arriving in the UK, leaving a net "brain loss" of some 200,000 people. Now, as Brexit looms large, threatening to further clip the number of skilled migrants arriving in the UK, as free movement of labour from the continent is one of the Government’s notorious ‘red lines’, both public and private employers are facing the very real prospect of a talent crisis.

The UK is unlikely to even be able to look to the apparent comfort that AI will be able to replace some of this labour, as a number of reports have suggested the innovative new technology will actually require the creation of more jobs than it takes. With this in mind, businesses and the government have a great deal of soul searching to do when it comes to retaining key talent in the years to come – perhaps even having to pay a premium for skilled workers – in order to ensure a successful economic future.

Next generation of Londoners

Now a new study has found that the majority of UK cities are losing this battle, with the exception being London. The capital is seen by many as the area of the UK best insulated from the impact of Brexit, with the metropolitan, multicultural city well-linked to Europe and the world as one of the globe’s top trade hubs. Grant Thornton still found that 51% of both current university students and 16-18 year-olds from across the country, including London, considered themselves firmly in the “London Rejecter” category, consisting of those who don’t want to live or work in London, and don’t expect to, although nearly 7 in 10 (69%) students who study in the capital want to stay and work there after graduating, reluctantly or otherwise, in coming years.

Beyond the capital, the picture looks far grimmer for most regions. The East and South East were the worst performing locales when it comes to battling brain drain, with 12% and 14% of prospective graduates there planning to stay respectively. In the East and West Midlands, meanwhile, a sparse 17% of students informed Grant Thornton they intended to stay in the region after graduation.

In contrast, the North West is outperforming other regions in combatting the ‘brain drain’, which is set to see many young people move to London in search of professional roles on graduation. The region saw 28% of students wanting to stay and work there after graduating. In addition, the North West performed well at retaining young talent at an even earlier stage, with 46% of respondents who grew up in the North West also choosing to go to university in the region.

When individuals were quizzed on what factors were important to them when choosing somewhere to live and work after graduation, North West students followed the Millennial trend of prioritising work-life balance over other factors, with 51% of students saying this was important to them. Job availability was also important to 43% of respondents, while 42% said they wanted to be based somewhere with good opportunities for their career.

Interestingly, the group seemed at least equally motivated by how bad London could be, or at least how it represented little improvement on their current situation, rather than how fine conditions were in the North West. With a frankly low 37% saying affordability of housing in the North West was important in wanting to stay – suggesting housing isn’t as affordable as it might be – the same sample also noted reservations about what life in London had to offer, with 84% stating that the affordability of housing was poor and 77% adding it was a place where it was difficult to afford essentials such as food or utilities, suggesting that the stagnation of wages in the expensive city was also a factor putting them off, even though 62% conceded that there were probably more opportunities for career development in the capital.

Destinations

Unsurprisingly given the strong science and pharmaceutical infrastructure in the North West, the majority of respondents also cited a clear idea of the sectors they wished to work in post-graduation, with science and life science being the most popular choice, and 27% of respondents wishing to work in these fields. This was closely followed by the media, the public sector and health and social care, as 26% highlighted a desire to enter work in each of these fields, while 19% hoped to work in technology or telecommunications.

Discussing the research, Carl Williams, North West practice lead at Grant Thornton UK, said, “Businesses up and down the country and from every single sector are crying out for talent…What is worth noting is that it’s not just job opportunities and careers that attract the brightest graduates. They also want to live somewhere where they can enjoy a good work-life balance and in vibrant communities where there is plenty for them to enjoy in their leisure time. Certainly, the North West punches above its weight in this regard, and this is doubtless no small part of why we are retaining talent to such an extent.”

Williams added that businesses in both London and the North West needed to guard against complacency, however, stating, “There is always more businesses can do to make their location and offering enticing for fresh talent. As we continue to see skills shortages across many sectors and the impacts of Brexit on the talent pool become more apparent, this will become an increasingly business critical issue and companies need to be thinking about this now to alleviate potential problems in the future.”

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Brexit will have major impact on UK-EU electricity flows

22 April 2019 Consultancy.uk

Brexit could have a major impact on the consumer price of electricity in the UK, according to an analysis by Sia Partners. The total costs for UK society could swell to €600 million annually due to less efficient flows of electricity.

As the Brexit process has perpetually stalled, with no realistic end in sight now until Halloween, underprepared businesses have been handed a lifeline. The scramble to prepare for a No Deal scenario can now continue for another half-a-year, and one of the key factors which companies will need to consider when drawing up these plans is the cost of accessing utilities post-Brexit. In the digital age, virtually no business can survive without a ready supply of electricity – while the pay-cheques of staff will also need to inflate to accommodate future rises in bills.

With significant cross-border flows of electricity between continental Europe and the UK, Brexit is destined to have a major impact on individuals and companies in this manner, according to new analysis by consulting firm Sia Partners. These flows of electricity are governed by common European rules, but when the UK leaves EU, Britain’s electricity markets will no longer be integrated into Europe’s ‘Internal Energy Market’.

European model

Historically, electricity grids and markets were developed on a national level. However, years ago the EU set out to achieve integration in electricity grids, on the premise that coupling grids and markets can lead to significant benefits. By making electricity flows possible, price arbitrage can be faded out by allowing buyers to access cheaper prices offered beyond the country’s own borders, driving up competition and lowering average prices.

Brexit will have major impact on UK-EU electricity flows

An analysis of electricity flows between the UK and Ireland demonstrates this. Before Ireland was coupled to the UK, commercial electricity exchanges on the UK - Ireland border flowed 40% of the time against the natural direction, i.e. from the higher to the lower price market. After more effective cooperation and regulation was put into place ('After the I-SEM' went live), the picture changed drastically, with commercial flows now following the price differential 96% of the time. Quantifying this welfare benefit is not easy: according to one estimate by ACER, the economic added value of having market coupling with implicit capacity allocation on the GB-Ireland border (1GW) amounts to around €110 million annually.

Europe’s aim is to achieve interconnection of at least 10% of their installed electricity production capacity by 2020. As it stands, seventeen countries are on track to reach that target by 2020, or have already reached it.

On the UK side, the region currently has a total capacity of around 5GW connected with mainland Europe (France, the Netherlands, Ireland, Belgium), corresponding to roughly 5% of UK’s installed capacity. In comparison with other EU countries, this ratio is on the low end; however, the UK is playing catch-up and has 10 interconnections scheduled for commissioning in the next four years.

Brexit

It's clear that the UK’s withdrawal from the EU will have an impact on electricity markets co-operation. The question which remains is how large will the impact will be? To provide a forecast for this, analysts at Sia Partners ran a modelling exercise with two scenarios in mind. After leaving the European bloc, the UK will have to make agreements with European countries, similar to how Switzerland and Norway currently operate. Norway has a deal with a relatively high level of integration with the EU’s internal energy market, while Switzerland stands at the other end of the spectrum, with the country excluded from several market coupling initiatives (e.g. MRC, XBID) and from implicit capacity allocation with any other EU member state.

“If Brexit leads to a construction which is similar to the Swiss deal, where UK’s electricity borders are uncoupled from its neighbouring countries, then there will be a major loss of welfare.”
– Sia Partners

If the UK follows in the footsteps of Norway, then the consequences of Brexit could be muted. According to Sia Partners’ calculations, the economic loss would be minimised in the mid-term, with only operational challenges expected. For example, the implementation of pan-European projects, such as XBID, could run into delays in the UK. The EU currently has 7 of such interconnection projects scheduled for completion before 2022.

“In case a Norwegian style deal is struck, the UK will lose its decision power related to EU energy policy but it would allow keeping the benefits linked to the internal energy market not only for itself but also for Ireland and continental Europe,” the researchers state.

If, however, a Swiss deal is struck, then the projected costs could range between €500 million to €1 billion. An expected 60% of this loss will be borne by the UK, 16% by France, and 8% by Belgium, the isle of Ireland and the Netherlands. The researchers concluded that if Brexit leads to a construction which is similar to the Swiss deal, where UK’s electricity borders are uncoupled from its neighbouring countries, “then there will be a major loss of welfare.”