Jonathan Portes / Apr 2023
In January 2021, alongside the end of the Brexit transition period, the UK introduced the most far-reaching changes to immigration policy in recent history, which included the end of free movement between UK and the EU, and the introduction of a new system for work-related migration under which (broadly speaking) country of origin is irrelevant.
The result has been a dramatic reorientation of UK migration flows. In the year preceding the Brexit referendum, net migration from EU countries to the UK was well over 200,000; in the year to June 2022 it was close to zero. By contrast, immigration from outside the EU has more than tripled, to about half a million, by far the highest level in recorded history. And while this reflects in part exceptional flows of refugees from Hong Kong, migration for work and students has also increased substantially.
This increase has confounded predictions – while both government and independent analysts predicted the direction of these changes, the magnitudes have surprised almost everyone. Crucially, the new system is considerably more liberal than that originally proposed by Theresa May. It allows employers to secure visas for anyone employed above a salary threshold (typically about £25,000, now well below average earnings in the UK) and in an occupation requiring skills at or above RQF3 (broadly, graduating secondary school). For the health and social care sector, the provisions are even more liberal, with even entry-level care workers eligible.
Coming at a time when there are labour market shortages in a number of sectors – but especially in health and care, as increasing numbers of the existing workforce are voting with their feet in the face of deteriorating pay in conditions – this has led to unprecedented levels of migration, with particularly large inflows from India, the Philippines, Nigeria and Zimbabwe. Meanwhile, the UK is considerably less attractive to Europeans than before Brexit, since they now require a visa, and in addition are subject to various other charges and restrictions.
In the short-term, the result has been paradoxical – record levels of migration, but at the same time widely publicised labour shortages in those sectors which were heavily reliant on EU-origin workers, and where pay and/or skill levels are typically not sufficient to enable employers to secure visas.
However, this is a feature, not a bug: the stated objective of the new system was to reduce lower-skilled migration and hence to encourage firms to recruit and train British workers, and to increase productivity-enhancing investment. Inevitably, in the short-term, this means some disruption to existing business models and entails some economic costs. Longer-term, the jury is still out – so far at least there is little or no evidence that employers are raising wages but the broader impacts will take some time to work through.
Nevertheless, we can already say that the new system has not led to the anticipated fall in the number of migrant workers coming to the UK (still less for students, where the fall in EU-origin students has again been more than outweighed by increases in those coming from South Asia and Africa). And it does, as planned, seem to have shifted the skill mix of those coming in the desired direction.
And while the failure of overall numbers to fall is unpopular with some Brexit supporters and the more xenophobic/nationalist wing of the Conservative Party, it has largely regarded with equanimity by the wider public, which has shifted in a considerably more pro-immigration direction since the Brexit vote: whether because of the perceived increase in “control” afforded by the new system, or a greater consciousness of the economic benefits of immigration is unclear.
Meanwhile, however, it is worth recalling the promises of the economically liberal wing of the Brexit coalition: that post-Brexit Britain would, as regards both trade and migration, compensate for the losses resulting from new barriers with the EU with greater openness towards, the rest of the world, especially towards fast-growing emerging economies. Most trade economists regarded such hopes as unrealistic, and so far there is nothing to suggest they were wrong; the UK’s trade performance in recent years has been extremely disappointing, underperforming almost all its key competitors in the EU and elsewhere.
But when it comes to immigration, the opposite is the case: the UK has confounded expectations by pursuing globally oriented policies in a broadly liberal way. Both the political sustainability and the long-term economic consequence are, of course, difficult to predict. But so far at least migration is one policy area where Brexit does appear to be delivering on its promises. In contrast, while EU member states have made some progress towards liberalising labour migration policies in recent years, overall they lag well behind; a failure which, if not remedied, is likely to have large and growing economic costs over the next few decades, given both demographic pressures and the need to spur growth in high productivity service sectors. In this area, if not in others, perhaps the EU has something to learn from us.