Rather than being a drain on the national coffers, immigration is actually essential to maintain diversity of talent in the workforce and grow the economy
There are few more subjects quite so incendiary in the current climate than immigration. It has gradually crept up the government’s agenda in reaction to growing pressure from right-wingers, and to begin with public opposition in the business world was relatively muted. But a gathering resistance amongst the business community has been keen to emphasise how vital migration has become for the UK economy, with entrepreneurs like former Elite Business cover star Lord Bilimoria going on record about how important transit is for UK plc.
With so much heat and passion on either side of the debate, it’s often hard to form an empirical picture of how immigration stands to effect UK enterprise in the coming years. For this reason, we decided to speak to the Centre for Economics and Business Research (Cebr) to discuss some of the figures in its recent report Impact of EU Labour on the UK.
First of all, it is useful to draw a distinction between pre-existing EU states and newer so-called accession countries. “Migrants from EU member states really perform higher-skilled work,” says Colin Edwards, senior economist at Cebr. “You’ll find them in sectors like financial services.” Conversely, migrants from accession states are more likely to end up in different sorts of roles, including hospitality, construction and manufacturing. Since the block on migration from accession states was lifted in 2005, there has been a significant increase in the influx of migrants to the UK.
Despite this, there are still plenty of things the two groups of migrants have in common. “In both sets of circumstances and both groups of people, they’re more likely to be employed than the average UK citizen; they’re productive members of society,” comments Edwards.
Migrants from these areas tend to be more of a working age than the general population, in part because they are moving here for the specific motivation of earning money and improving their lot. This also means that the proportion of migrants who are in work is far higher than that of native Britons – 63.3% compared to 56.2%. “They arrive young and in their prime, as it were, and eager for work. We essentially catch them right in the sweet spot of their working lives.”
Based on this information and ONS population projections, Cebr ran several different scenarios based on the way changes to immigration stand to affect British GDP. The first, dubbed the ‘central scenario’, would see long-term migration of 140,000 individuals each year and a rise of 7.9% in the working population by 2050. The ‘EU exit-scenario’ would see an annual migration of just 100,000, a decline in the size of the working population of 1.9% and our GDP shrinking 2% by 2050. Lastly, if the UK implemented a policy of zero net migration, we would lose 6.7% of our GDP by the same year, totalling a real world loss of £204bn. It goes without saying that the effect of this on enterprise would be absolutely crippling.
So why is our economic future so dependent on continued migration? In part, it’s down to a necessity brought about by our growing aged population, in which enlarging the size of the working population could go some way to offsetting the huge social cost of supporting the older generation. “There is a structural shift that needs to take place in the way the UK funds its ageing population,” Edwards explains. “In a sense this issue of immigration is not the whole solution but it certainly helps to alleviate what is a serious issue facing the UK.”
A second reason is that cultural migration is essential to keep bringing innovation and talent into the country. “Estonia, for example, is quite an interesting example with computer programming skills,” says Edwards. Given a lot of our economic eggs are currently being kept in the London tech basket, access to the best talent on offer is absolutely invaluable. “At the end of the day, the more diverse the range of skills and the more diverse cultural views and ways of doing things, that has to be beneficial to the way any business operates.”
However, this, on its own, probably isn’t enough to assuage the fears of more hardened opponents of immigration. An oft-cited objection to an increase in the size of the working population is that the UK doesn’t have enough jobs to support an influx of workers but, of course, this is a fallacy. “There isn’t a limit of the number of jobs that the UK can create,” explains Edwards. “When people do move to the UK and work, they also spend money in the UK and that has a ripple effect throughout the economy, generating more jobs.”
Another common concern is that migrant workers prepared to work for lower wages might drive down the average wage and leave UK natives with less cash in their pockets. However this isn’t borne out by the evidence.
First of all, the national minimum wage provides a firm floor for all UK workers, regardless of nationality. “It’s also important to recognise that many people who come from countries like France, Germany and Italy, actually earn more than the average UK salary, because they find themselves in potentially more senior positions and more skilled roles,” Edwards comments. However, he’s keen to stress that migrant workers make up a very small section of society –just 5.5% – meaning this net benefit is still comparatively minor. “We’re still talking about a relatively small proportion of the total labour force so their impact is always going to be limited.”
All told, immigration can actually provide some real economic benefits but how does this to stand to affect SMEs directly? Should they be looking to maximise the benefit they might be receiving from the migration of talent?
Put simply: no.
“If businesses are able to get involved in increasing the skill sets of UK citizens that’s a brilliant thing to do to,” Edwards comments. “But it just really comes down to finding the best person and employing them. It shouldn’t really matter where they’re from.”