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“Significant” drop in immigration amid economic slowdown

Immigration is down. And a new report suggests the economic impact of cutting net migration as per the Tory manifesto would hit GDP by 1.5% to 3.1%


The latest immigration figures released show net migration at 248,000 in 2016. It’s a drop by 84,000 from the year before, which the Office for National Statistics (ONS) puts down to “statistically significant” numbers of mainly EU citizens emigrating from the UK and a decrease in the number of people immigrating to the UK. The report said that whilst the fall in overall immigration was not statistically significant, the drop in people immigrating from Eastern European countries was statistically significant.

Within the figures, the report also noted a statistically significant drop in people coming to study in the UK. 136,000 people came to study in the UK in 2016 compared to 104,000 in 2015. The ONS said this was largely due to the decrease in numbers in the last quarter. It’s news that is likely to be unwelcome by the universities sector whose income will be hit by the fall in students.

In March, a House of Lords committee heard evidence from industry experts who said they were already facing a labour and skills shortage and warned that introducing immigration restrictions could make it worse. Many industries across the UK also highlighted their concerns that many EU citizens were considering leaving the UK because of ongoing uncertainty over their status and increased levels of discrimination they have faced since the Brexit vote.

In a statement about ONS’ latest migration report, Marley Morris, a research fellow at IPPR said “if urgent action isn’t taken to provide certainty to EU nationals living in the UK, then we won’t be able to create the migration system we need for our post-Brexit economy to succeed – because skilled migrants will decide of their own accord to pack their bags and leave.”

If urgent action isn’t taken to provide certainty to EU nationals living in the UK, then we won’t be able to create the migration system we need for our post-Brexit economy to succeed – because skilled migrants will decide of their own accord to pack their bags and leave.

We need to take steps now to grant deemed leave to all EU citizens in the UK and negotiate in good faith with the EU for a quick and fair deal on citizens’ rights.

Marley Morris, senior research fellow at IPPR

Immigration and the economy

The figure below from the ONS report shows migration over the years for EU citizens, non-EU citizens and Brits.

Focussing on the migration figures from the EU, it shows a downward trend following the referendum vote last year. Immigration from the EU fell from 189,000 to 165,000 at the end of the third quarter of 2016 and then fell again to 133,000 at the end of the fourth quarter of 2016. You can download the specific numbers from the ONS report).

Looking at immigration from the EU over a longer period of time, the figure shows a marked increase in people moving to the UK from 2004. This was when the EU was enlarged to include eight countries from Eastern Europe. However, it also shows a marked decrease in immigration from the EU following the economic slowdown in 2008. Immigration started to go up again 2013 as the economy recovered.

With immigration looking like it’s on another downward trend, it’s perhaps no surprise that the economy is showing signs of a slowdown. In another report published today, the ONS revised down its initial estimate of UK growth to 0.2%. Slower growth since the Brexit vote has largely been put down to the decline of the pound, which has led to rising inflation and a fall in consumer spending. As Reuters reports, rising inflation and lower consumer spending has also impacted on the public finances with the budget deficit widening more than expected.

In campaigning ahead of the general election, Theresa May committed again to reducing net migration to the “tens of thousands”. The pledge features in the Tory manifesto despite also featuring in the previous two Tory manifestos and the Tory government’s failure to meet it.

May’s immigration offer: empty promises and wilful damage to the economy

Consequences of limiting immigration on the economy

The Centre for Economic and Business Research (Cebr) published a report earlier this week on the consequences of limiting migration. They focussed on the impact on the “Flat White economy”, which refers to digitally based businesses, key elements of which are online retail and online marketing. The Cebr’s analysis suggests a threefold effect on the economy from migration, which you can see listed below:

  1. Migration alleviates skill bottlenecks and hence removes barriers to faster growth.
  2. Migration boosts diversity and also boosts creativity which enhances productivity with both direct and indirect effects on economic growth.
  3. Migration makes business more profitable, enhancing investment and hence growth. Even if the initial impact is to place downward pressure on wages through the enhanced supply of labour relative to demand, the secondary effect is to boost wages through faster growth.

Looking at two scenarios whereby net migration is reduced to 73,000 (so down to the “tens of thousands”), the Cebr looked at the impact on the UK’s GDP. In the first scenario, net migration is reduced over a two year period and in the second, it’s reduced over an eight year period. The Cebr’s results found that by 2025, GDP would be cut by 3.1% in the first scenario and by 1.5% in the second. The analysis was clear that reducing net migration to the “tens of thousands” would negatively impact on the economy.

There was also a dramatic impact on public finances with the impact on the deficit of reducing net migration costing between £9.5bn and £20bn in 2025.

Global Future also produced a report that warned of “catastrophic consequences for the economy” should net migration be dramatically reduced. In their analysis, Global Future concluded that because of labour shortages and the UK’s ageing population, net migration should be “well in excess of 200,000 a year”.


Image: © Alex Segre / Shutterstock.com
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