Post-Brexit immigration system ‘will do little to change UK economic trajectory’

A shortage of migrant workers alone is “unlikely” to increase wages in the longer term and the UK’s post-Brexit immigration system “will do little to change the UK’s economic trajectory”, according to the Resolution Foundation.

The think tank said its research shows immigration has changed the size and shape of the UK’s workforce in recent decades, but questioned how substantial the economic impact of the new post-Brexit immigration system will be.

The report found that while the Government’s policy is likely to reduce migration into the UK, the change is unlikely to significantly boost productivity across the economy, but neither will it deliver a big hit to the public finances.

Instead, the research found, the new system is “unlikely to move the dial very much on big-picture economic outcomes like the shape of the economy, or even the regional distribution of workers”.

“Ultimately, a migration strategy is not a substitute for an economic strategy,” Kathleen Henehan, senior research and policy analyst at the Resolution Foundation, said.

The report singled out claims by the Prime Minister at the Conservative Party conference in October where he suggested a low wage and low productivity economic model had been enabled by “uncontrolled immigration”.

Instead Boris Johnson argued the UK would “control” immigration and move to a higher wage and higher productivity economy.

“There is a sense, at least according to the Prime Minister, that any migrant-induced labour shortages that do transpire will result in higher wages in the longer term. So far, the evidence suggests this is unlikely,” the Resolution Foundation report said, adding such a change would not happen “automatically”.

The report acknowledged the tightening of the system post-Brexit may cause “sharp shocks” in the short term and cause significant change for some lower-paid industries that rely on migrant labour.

But it found that in the longer term there are “few potential situations in which a shortage of migrant workers will drive up wages without reducing employment or production in the long term”.

The report, called Under New Management and produced as a collaboration with the London School of Economics and funded by the Nuffield Foundation, said it examined how post-Brexit changes will impact the workforce and found that a coming change in the level and nature of migration will not transform the economy or public finances.

It also found that more restrictive and reduced immigration could limit the UK economy’s ability to “flex” in response to changes such as those caused by the pandemic and the move to a net zero economy.

“Comparatively lower levels of work-related immigration and more restrictions on their destinations will likely reduce the economy’s ability to shift labour across industries and occupations,” it said, adding “this is worrying” in the context of changes to the structure of the economy expected this decade.

Ms Henehan said: “Despite claims from both sides of the debate, the UK’s new migration regime will do little to change the UK’s economic trajectory, or its central low investment, low productivity challenges.

“Over the past two decades, immigration has had a profound effect on the size and composition of the UK’s labour force, with migrants driving over three-quarters of the growth in the workforce.

“And sectors which are particularly reliant on migrant workers – such as food manufacturing, warehousing and accommodation – are more exposed to the regime changes, which will limit firms’ abilities to hire low-paid non-UK workers in these industries and to respond quickly to changes in demand.

“But evidence does not suggest that the coming change in the level and nature of migration will transform our economy, or our public finances.

“Ultimately, a migration strategy is not a substitute for an economic strategy.”