Photograph: Andy Renn/EPA
Immigration played a key role in Britain’s decision to leave the European Union in 2016. Opinion polls showed strong support among leave voters for ending free movement and leaving Westminster to decide who should be allowed to enter the country for work. The slogan “Take back control” was largely about this.
The mood has changed since the Brexit vote. There is still a feeling that ministers need to do more to stop people crossing the Channel in small boats. But legal immigration is no longer such a hot political issue. Other issues – such as cost of living and rising interest rates – are more important.
The more relaxed mood is certainly not the result of Britain pulling up the drawbridge to immigrants over the past seven years. In contrast, net migration – the number of people arriving minus the number of people leaving – rose to a record 606,000 in 2022.
There were some one-off factors last year – for example, the arrival of refugees from Afghanistan and Ukraine – which will not be repeated in the future. But even ignoring people fleeing wars and persecution, the number of non-UK citizens working or looking for a job rose by 257,000 in 2022. As UK economist Samuel Tombs points out in Pantheon Macroeconomics, immigration is almost all to blame. The size of the workforce is projected to increase by 0.9% through the second quarter of 2023. Foreign-born workers have filled the gap left by the lack of domestic candidates and thus helped reduce the supply shortage.
There has been a notable change in where the new foreign-born workers are coming from. Before Brexit, free movement under the rules of the single market meant the vast majority came from EU countries. Under the points-based system, workers can come from anywhere in the world, provided they meet certain criteria. These include being offered a job of a certain skill level, that they can speak English and that they will be paid more than £26,200 per year.
The latest data shows that the four countries that secured the most work visas were India, Nigeria, Zimbabwe and the Philippines, covering almost half of the shortfalls in the health and social care sector. Britain’s gains, inevitably, come at the expense of poorer countries, who have lost some of their brightest and best workers, even though they send home a large portion of the money they earn through remittances.
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Mixed signals are being sent from the government
Some “red wall” Conservative MPs have called for stricter immigration controls, including raising the minimum wage required for a skilled foreign worker to £38,000. This would certainly give companies a compelling reason to substitute capital for labor, but with considerable short-term costs. In a globalized world, companies can easily find skilled people from abroad to fill vacancies, while recruiting and training domestic employees will take time.
Mixed signals are being sent from the government. Toombs says the decision to raise the minimum wage this year by 2.3% for a foreign national to obtain a skilled worker visa – which is well below the more than 8% increase in private sector annual income – suggests this. Suggests ministers are secretly loosening immigration rules.
However, at the same time, the annual fee paid by immigrants to access the NHS has been increased from £624 to £1,035, and Rishi Sunak is planning to relax immigration rules to secure a bilateral trade deal with India. Making clear their reluctance.
Rishi Sunak (left) during a meeting with Indian Prime Minister Narendra Modi at the G20 summit in Delhi. Photograph: Dan Kitwood/PA
This reduces the chances of immediate success. Sunak would love to reach a deal with the world’s fastest-growing major emerging economy – but not at any price. India has a reputation for consistently fighting its case in trade negotiations conducted by the WTO, and its key demand in bilateral talks – more visas for Indian students and workers – is one that makes life difficult for Sunak.
It’s a tough call for the prime minister, who needs to show voters that the economy can benefit from better-calibrated migration. There is certainly evidence that geographic variation in immigration is positive for the UK. Data from Oxford University’s Migration Observatory shows that migrants from India and sub-Saharan Africa are more likely to be employed in high-skilled jobs and have higher wages than migrants from Eastern Europe. In 2020, the average salary of a non-EU-born employee was £31,400 – £3,000 higher than that of an EU-born employee.
There have been problems for some sectors – such as hospitality – which in the past have relied heavily on well-educated migrant workers from the EU to fill vacancies. But if the idea was to create a migration system that would enable the economy to be less dependent on low-skill, low-wage, low-productivity jobs, then a shift to a points-based system makes sense. If the supply of cheap labor is restricted and the cost of employing people rises, companies will have more incentive to boost spending on new labor-saving equipment.
There are tentative signs of this happening. Berenberg Bank’s UK economist Kallum Pickering points out that UK business investment has increased by 35% since hitting a low point during the Covid lockdowns of spring 2020 and is now 6% above its pre-Brexit vote high. To some extent, this is a result of the end of the uncertainty that hindered investment in the years since 2016, but it is also a matter of “needs.” For the past 30 years, he says, the UK has relied on two things to grow its economy – cheap foreign labor and low-cost imports – both of which are becoming increasingly difficult to secure.
In other words, globalization and changed immigration systems may result in more expensive labor, higher levels of investment, and a more self-reliant economy. Everyone will definitely be welcome.