6. Immigration

• Government wishes to reduce immigration, but an ageing population means UK needs more migrant workers not fewer
  • Policy initiatives to reduce migrant workers (e.g. increasing retirement age) will take years to be effective
  • Freedom of Movement rules include controls over EU citizens, but UK decided not to implement them
• Net migration from non-EU countries has significantly exceeded that from EU (by four to one over the last decade)
• EU migration benefits UK economy overall
  • EU27 citizens of working age are more likely working than UK or non-EU citizens
  • EEA citizens in 2016-17 contributed about £5 billion towards UK public finances
  • Effects of EEA migration on UK workforce wages and employment are small
  • Reduced EU migration to UK damages UK economy and public services
• Brexit has already caused:
  • Fewer EU/EEA citizens to arrive and more to leave
  • Rising net migration from non-EU/EEA countries

Click here for summary of Brexit FactBase.

UK immigration trends

Why does UK need immigration?

Immigration is a normal feature of a healthy economy. On the supply side, people move regions or countries to acquire new skills and to take advantage of new opportunities. On the demand side, skill and labour shortages cause people to move.

Even though immigration is normal, governments frequently fail to plan for it adequately.

Old-age dependency ratio

There are powerful demographic forces at work. The UK’s old-age dependency ratio is increasing, as in other developed nations and the EU as a whole,

The old-age dependency ratio is the ratio of older people (aged 65+) to working-age people (aged 15-64).

The ratio of older UK citizens to working age population will increase significantly in the rest of the 21st century (see Figure 6.1 from the United Nations).

The Office for National Statistics estimates:

• In 2016, the UK had 285 older people for every 1000 of working age
• By 2019, this rises to 297
• By 2039, this rises to 403

Policy options

There are potential policy options to address the ‘demographic gap’ for the UK (and other EU countries). These include raising the retirement age or encouraging families to have more children. Policy options like these take years to have meaningful effects and reduce the need for migrants.

In the long-run, the UK will need to find alternatives to migration to sustain its working age population. For example, technological change  (such as artificial intelligence and robotics) is likely to change workforce requirements, which may reduce demand for migrant workers. However, the UK and the EU27 seem likely to need migrant workers for a long time.

Everything else being equal, the rising dependency ratio will increase the UK’s demand for migrant workers, not reduce it. Over the next five to ten years, as the EU’s old-age dependency ratio increases, the UK will be competing with the EU to attract migrant workers.

Sources:
United Nations, Department of Economic and Social Affairs, Population Division, World Population Prospects: 2019
Eurostat, Population structure and ageing
ONS, Overview of the UK population: January 2021

EU citizens in UK and vice versa

Compared to EU countries, the UK is mid-table in terms of the share of foreign nationals in its population (2018 data – both EU and non-EU). The UK figure of 9.8% is two percentage points more than the EU average of 7.8% (see Figure 6.2).

In 2016, there were around 3.6 million EU citizens living in the UK.

• Around a third were living in London – about 1.2 million people – compared to 11% of the UK-born population.
• Outside London, three UK regions had the most EU nationals: South East (438,000), East of England (363,000), and North West (256,000).
• Three regions with smaller EU populations were: North East (46,000), Wales (78,000) and Northern Ireland (98,000).

1.3 million UK nationals live in the rest of the EU (based on United Nations data for 2017). These divide into long-term and short-term EU residents. Using census data for the EU up to 2011, the ONS estimated that there were 900,000 long-term UK residents living in the EU27 for more than 12 months (the current figure is probably higher).

Sources:
Statista, Share of foreign nationals in EU member states
House of Commons Library, Migration statistics, January 2018 
ONS, What information is there on British migrants living in Europe?, January 2017 
United Nations Global Migration Database, International migrant stock by destination and origin – 2017, Table 1 

Long-term international migration

Long-term migration means people who intend to stay for 12 months or more. Figures 6.3 and 6.4 show UK trends since 2011:

• For EU and non-EU citizens, more people come to the UK than leave.
• More British citizens leave the UK than return.
• Each year, net non-EU migration exceeded net EU migration.
• Following the referendum in 2016:
  • Annual immigration initially declined, but since 2018 has been relatively stable.
  • Net non-EU immigration has:
    • been offset by fewer EU citizens arriving and more leaving.
    • continued to increase since 2013
    • declined but is now relatively stable.
  • Steady net emigration of British citizens continues.

As the Migration Advisory Committee said in August 2017:

“This is possibly because the UK is perceived as becoming a less welcoming place to stay, but also perhaps because the economic changes in the UK (such as the devaluation of the pound) make it a less attractive destination relative to other EEA countries.”

Figure 6.3: Long-term migration 2011 – 2020

Figure 6.4:  EU and non-EU net migration 2011 – 2020

Source: ONS, Migration statistics – quarterly report, August 2020

ONS statistics 2011 – 2020

Over the decade from 2011 to 2020 (Table 6.1):

• Net immigration was 2.65 million made up of:
  • 6.11 million immigrants arriving
  • less 3.46 million emigrants leaving

  or

  • 2.16 million net non-EU immigration
  • plus 1.06 million net EU immigration
  • less 0.57 million net British emigration (also EU citizens in this period)
• Net immigration of EU citizens increased from 82,000 in 2011 to a peak in 2015 of 183,000 (143,000 adjusted for British emigration).
• When British citizens are treated as EU citizens, net EU immigration:
  • was 0.49 million (averaging 49,000 a year)
  • represented 0.7% of the population of 67 million
  • from 2011 to 2020 represented 19% of total net immigration – compared to 81% for non-EU citizens.
• In the year to March 2020, there was net:
  • non-EU immigration of 316,000
  • EU immigration of 58,000
  • British emigration of 62,000

Figure 6.5 summarises Table 6.1 and splits migration into EU and non-EU for the two halves of the decade 2011 – 2020.

• Net EU migration of 1.06 million (490,000 with British emigration deducted) was lower 2016-2020 than 2011-2015, averaging:
  • over the decade: 106,000 a year (49,000 a year, net of the net emigration of 57,000 British EU citizens)
  • 2011-2015: 129,000 a year (72,000 with net British emigration of 57,000 deducted)
  • 2016-2020: 83,000 a year (27,000 with net British emigration of 56,000 deducted) – markedly lower than 2011-2015
• Net non-EU migration was 2.16 million – averaging:
  • over the decade: 216,000 a year
  • 2011-2015: 178,000 a year
  • 2016 -2020: 254,000 a year  – markedly higher than 2011-2015

  

   

Freedom of movement

Overview

The Free Movement Directive lays out the principles on which FOM of people operates. EU citizens have the right of free movement to other member states. 

The Directive does not mean open borders. Border controls are a separate issue.

• There were UK border checks on all foreigners entering, including those from the EU, because the UK had opted-out of the Schengen passport-free travel agreement.
• The impact of the refugee crisis on the UK was not directly affected by the UK’s EU membership and FOM. For example, refugees admitted to Germany or Greece had no right to live in the UK. Over the longer-term, if they became EU citizens (after about six years), they would have gained those rights.

EU rules and controls

Under the 2004 Free Movement Directive (see panel below), EU citizens may reside in another member state for up to three months without conditions. Afterwards, residence may continue if the individual is working, studying, self-sufficient, self-employed, or – with some conditions – actively looking for work. If not, the citizen may be deported.

The UK had not implemented these controls. However, some EU countries, such as Belgium, use the powers flowing from the Directive to deport EU citizens who are not economically self-sufficient.

EU jobseekers in the UK had limited access to out-of-work benefits. They received no Jobseeker’s Allowance for the first three months of their stay; then, they were entitled to a maximum of 90 days’ support. The allowance was small and not viewed as a magnet for EU migrants.

Schengen

Schengen removes border controls for movement of citizens between member countries.

• UK was not a member of Schengen: the UK had an opt-out.
• Ireland has an opt-out and is not in Schengen, but UK and Ireland have their own Common Travel Area.
• Four other EU member states are not in Schengen but have confirmed their intention to join: Bulgaria, Croatia, Cyprus, Romania.
• Four non-EU countries have opted in and are associate members of Schengen: Iceland, Liechtenstein, Norway and Switzerland.

Refugees arriving in EU countries often receive a temporary permit while waiting to be granted asylum status. This permit does not usually allow them to move between Schengen states.

Posted workers

Posted workers are workers sent by an employer from one EU member state to work temporarily in another. In May 2018, the European Parliament amended laws on posted workers to entitle temporary overseas workers to the same minimum pay as those in the host country. Posted workers will also be able to benefit from regional or sector-specific collective agreements.

This closed a loophole that enabled exploitation of potentially vulnerable workers. Employers will also need to pay for travel, board and accommodation, rather than deducting these costs from wages, and make sure accommodation meets local standards. Postings will be limited to 12 months, with the possibility of a six-month extension.

Member states had two years to enforce the rules. The deadline fell during the UK’s Brexit transition period, which ran until 31 December 2020.

Source: Free Movement Directive, The Schengen area

Sectors and skills

Migrant workers and sectors

In 2016, the UK labour market comprised 26.9 million (89%) UK  and 3.4 million (11%) non-UK nationals – 2.2 million (7%) are from the EU and 1.2 million (4%) from other countries. See Table 6.2 (these are the latest available figures from ONS).

Several UK industry sectors and the public sector rely on large numbers of EU workers. The sectors with the most EU workers are:

• wholesale and retail (507,000);
• financial and business services (382,000);
• public sector (362,000); and,
• manufacturing (312,000).

The industry sector most dependent on migrant workers is transport and communication where 14.4% of workers are non-UK, followed by manufacturing (13.9%). Some sub-sectors are more dependent on EU workers (see below).

See the Brexit FactBase section on education, science and healthcare for the Brexit impacts on these sectors. Please also see the impact assessment section for impacts on other sectors.

Source: ONS, International immigration and the labour market, UK: 2016, April 2017

Sub-sectors

Within sub-sectors, large numbers of EU workers are found in logistics, the NHS and social care.

• Logistics industry: nearly 300,000 (14%) EU workers are employed. 93,000 EU nationals work in warehousing and other storage jobs, 23% of the total workforce. 31,500 Large Goods Vehicle drivers (10% of the total), 22,500 van drivers (9%), and 20,500 forklift truck drivers (21%) are from elsewhere in the EU. As with the food and drink industry, EU workers are filling the gap left by an undersupply in the domestic labour market. This is partly a reflection of the ageing workforce: for example, 67% of LGV drivers are aged over 45.
• NHS and social care: In 2019, there were approximately 180,000 EU nationals working in health and social care. They represented 5.5% of the NHS workforce and 9% in adult social care. In 2019, just under 11,000 doctors were working in the NHS (9.5% of doctors), who had received their primary medical qualification in another EU country. Mutual recognition of professional standards across the EU makes it easy for nurses and doctors to work in different EU countries. (Sources: House of Commons Library, July 2019 and The Kings’ Fund, October 2019)

EU citizens account for a high proportion of the workforce in food and drink manufacturing (29%), the creative industries (around 25%) and higher education (16%).

• Food and drink manufacturing is more reliant on EU workers than any other sector of the UK economy. c29% of the UK’s food and drink manufacturing workforce are non-British EU nationals (almost 120,000 workers).
• Creative industries: according to the Creative Industries Federation, EU workers currently constitute 25% of all workers in the UK visual effects industry, with non-EU workers accounting for another 12%. Similarly, UK video games companies currently draw 20%-30% of their staff from the EU.
• Higher education: the UK sector employs significant numbers of non-UK EU nationals. Non-UK EU nationals make up 16% of the UK-based academic workforce.

Source: Nick Clegg, Freedom of movement, Nov 2016  (unless otherwise stated)

Migrant workers and regions

London has by far the highest percentage of EEA workers in its workforce at 14%, double the UK average of 7%. The corresponding 2016 figures for other regions were:

• Scotland – 8%
• Northern Ireland – 7%
• Rest of England (ex London) – 6%
• Wales – 3%.

London also has a much higher proportion of workers from other countries at 26% than the national average of 7%. The three UK regions with larger EU national populations in absolute terms are the South East (438,000), East of England (363,000), and North West (256,000).

Migrant workers and skill levels

In 2016, there were 2.2 million migrant workers from the EU and and 1.2 million from non-EU countries. ONS analyses EU workers by the EU14, EU8 and EU2. See Table 6.3.

• 1.0 million workers are from the EU8 (Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia)
• 0.9 million workers are from the EU14 (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Republic of Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden)
• 0.3 million are from the EU2 (Bulgaria, Romania)

EU citizens of working age in the UK are more likely to be in work (80%) than their UK counterparts (74%) or non-EU migrants (62%) – see Table 6.3.

See Appendix J for table of ONS country groupings.

Most EU migrant workers are in lower-middle or upper-middle skilled groups (see Figure 6.5). A minority of EU migrant workers are low skilled. A higher proportion of EU8 and EU2 workers are low or lower-middle skilled.

However, EU migrant workers may be overqualified for the jobs that they do.

In 2016, 49% of EU citizens working in the UK were in low or lower-middle skilled occupations.

See Appendix J for ONS definitions of occupations mapped to skill levels.

Source: ONS, International immigration and the labour market, UK: 2016 

Figure 6.6 shows the top 25 occupations of EEA workers in the UK (EEA is the EU27 plus Norway, Liechtenstein and Iceland).

Source: Migration Advisory Committee, EEA workers in the UK labour market, August 2017 

Contribution to economy

MAC conclusions

The government’s Migration Advisory Committee (‘MAC’) gathered extensive evidence on the effects of ‘EEA’ migration on the UK. It published its final report in September 2018. By ‘EEA’ MAC means the EU27 plus Iceland, Liechtenstein, Norway and Switzerland (which is not in the EEA).

MAC’s principal conclusions about the impacts on employment and wages were:

• Migrants have no or little impact on the overall employment and unemployment outcomes of the UK-born workforce. The impact may vary across different UK-born groups with some negative effects for the lower-skilled and some positive effects for the higher-skilled.
• Migration is not a major determinate of the wages of UK-born workers. However lower-skilled workers face a small negative impact and higher-skilled workers a small benefit
• There is evidence that, overall, migration has a positive impact on productivity and GDP.

The evidence contrasts with the common view that immigration reduces the pay and job chances of the UK-born (due to more competition for jobs). This erroneous view is often based on the ‘lump of labour’ fallacy – the idea that the number of jobs or vacancies in an economy is fixed. This is not the case. Instead, research suggests that immigrant workers increase overall employment, GDP and productivity. Also, immigrants consume goods and services and increase demand, which helps create more employment opportunities.

Another useful source for key studies is the Bruegel Institute, the Economic Effects of Migration. January 2017.  Oxford University’s Migration Observatory provides extensive impartial analysis on migration.

Impact on public services

The UK does not collect data on how the contribution and use of public services differ by citizenship. This means that most studies about the economic impact of migrants assume they follow the same pattern of contribution and use of public services as the rest of the population.

Different types of migrant have different impacts. Some benefit the economy and public finances more than others. For example, several studies show that non-EU migrants  have a negative impact on public finances (in aggregate).

Impact on wages

Compared to the UK-born, EU immigrants tend to be more educated, younger, more likely to be in work and less likely to claim benefits. About 44% have some form of higher education compared to 23% of UK-born. In London, there are many EU citizens in finance and business services: occupations which are highly-skilled and highly-paid. In addition, EU immigrants pay more in taxes than they take out in welfare and the use of public services (see below).

The consensus is that recent migration has had little or no overall impact on wages. There is possibly some, small, negative impact on low-skilled workers (evidence to Migration Advisory Committee, Professor Jonathan Portes). However, the London School of Economics (LSE) found that UK regions with large increases in EU immigration did not see the jobs and pay of UK-born workers fall. LSE concluded that the big falls in UK wages after 2008 were due to the financial crisis and a weak economic recovery, not immigration.

Sources:
Migration Advisory Committee (MAC) report: EEA migration in the UK: Final report, September 2018
Centre for Economic Performance, LSE, Brexit and the Impact of Immigration on the UK Jonathan Wadsworth,Swati Dhingra, Gianmarco Ottaviano and John Van Reenen
Migration Observatory, The Fiscal Impact of Immigration in the UK, May 2017
Home Office, Impacts of migration on UK native employment: an analytical review of the evidence, March 2014

Fiscal impact of EU citizens

The fiscal impact is the taxes and other contributions to public finances, minus the cost of the public benefits and services received. It is easier to estimate the amount migrants are paying in taxes and receiving from benefits than to quantify their contributions to and use of public services.

The net fiscal impact of all migration on the public finances is relatively small. Overall, EU migrants tend to make a positive contribution while, overall, non-EU migrants do not. However, EU14 citizens contribute more (net) than other EU citizens, who claim more benefits relative to their tax contribution.

MAC conclusions

The MAC, which commissioned independent research, concluded that EEA migrants pay more in taxes than they receive in benefits. The Committee analysed the overall contribution to public finances in 2016/17. MAC found that EEA citizens made a positive contribution of £4.7 billion compared to non-EEA migrants who cost £9.0 billion. UK citizens cost £41.4 billion. These figures take into account the rise in national debt that occurred in 2016-17. 

In terms of impact on public services, the MAC concluded:

• Health and social services: EEA migrants contribute much more financially and through work than they consume in services. 
• Education: migrant children and the children of migrants form a higher fraction of the school population than migrants are of the school workforce. The Committee found no evidence that migration has reduced parental choice in schools or the educational attainment of UK-born children. 
• Social housing: migrants are a small fraction of people in social housing but a rising fraction of new tenants. Given there is little building of new social housing, this is inevitably at the expense of other potential tenants. The Committee also noted that the provision of public services and social housing was complex and slow to respond to changes in demand.
  

HMRC analysis

HMRC conducted detailed analysis, limited to income tax and some benefits. For the tax year 2014/15 EU citizens’ net contribution to taxes was £13.3 billion. For recently-arrived EU citizens (defined as over the last four years), the net tax contribution was just under £3.0 billion (see Table 6.4). Non-EU EEA and Swiss citizens contributed a further £271 million (net). Please note the limitations of the HMRC analysis:

• Restricted to benefits administered by HMRC: tax credits and Child Benefit. It did not include benefits administered by the Department of Work and Pensions (DWP), such as Housing Benefit, State Pension, working-age benefits, and other benefits. DWP estimated that in 2013-14, EEA citizens claimed £1.7 billion in benefits.
• Excluded the benefit of other taxes paid by individuals such as VAT or business taxes such as Corporation Tax or Business Rates.
• There may be regional imbalances between the taxes collected and the benefits claimed (for example between London and other regions).

Sources:
Migration Advisory Committee (MAC) report: EEA migration in the UK: Final report, September 2018
HMRC, Income Tax, NICs, Tax Credits and Child Benefit Statistics for EEA Nationals 2014 to 2015, August 2017 

Brexit impact

Overview

The challenge for the UK government is to decide what size of migrant workforce the UK will need in the future and to plan for it. The government’s Migration Advisory Committee (MAC) reviewed the impact on EEA workers in the UK labour market. The consultation closed on 27 October 2017. On 27 March 2018, MAC published an interim report, which summarises the evidence received to date but did not include interim conclusions or draft recommendations.

The Committee published its final report with policy recommendations in September 2018. Any policy changes to mitigate the impact of Brexit (such as re-training) are likely to take a long time to have an effect and are unlikely to have much impact over the next 5-10 years. The government published its White Paper on future immigration policy in December 2018 (see details below).

During the transition period to December 2020 existing rules remained largely unchanged. The Political Declaration described aspirations for future mobility.

Negotiations of independent trade deals with other countries, such as India, are likely to involve preferential visa requirements and increased immigration from those countries. There is pressure from India for easier access for its citizens. The UK, as an EU member state was, of course, able to set its own policy for immigration from non-EU countries.

Impact of reduced migration on economy

The Office for Budget Responsibility (OBR) and the Centre for Economics and Business Research published Brexit migration impact studies in late 2016 and 2017. Both flagged major risks to the economy and the public finances from reducing EU migration.

The studies used simplifying assumptions, but the overall direction of impact was clear. Given the many EU citizens in the UK workforce and their positive fiscal contribution, the findings are not surprising.

PwC published an economic assessment in November 2017 which demonstrated that restriction of future migration from the EU could have a marked effect on certain industry sectors and regions (for example, the London construction sector). PwC highlighted food manufacturing, hotels, restaurants and warehousing as sectors at risk.

Broad scenarios (not forecasts) indicate that reduced migration will have a negative impact on GDP, potentially approaching those resulting from reduced trade. By contrast, the increase in low-skilled wages resulting from reduced migration is expected to be, if anything at all, relatively modest.

The OBR forecast in late 2016 that reduced migration will reduce trend output growth by 0.3% per year, based solely on slower labour force growth. Separately, the Scottish Government’s assessment of the economic impact of Brexit said in January 2018 that Scotland requires continued EU migration to support continued economic growth.

The OBR forecasts assumed that net migration will fall to 185,000 a year from 2020-21 onwards, from 273,000 over the year to September 2016.

Impact of reduced migration on public finances

Reduced migration from the EU will have damaging effects on the UK’s public finances. Two reputable studies expected the cost to public finances to be greater than the UK’s net contribution to the EU.

Firstly, the OBR developed two scenarios of net migration to assess the impact of reduced migration on forecasted fiscal aggregates—such as net government borrowing and debt as a percentage of GDP:

• ‘High migration’ scenario, net migration falls to 265,000 by 2021.
• ‘Low migration’ scenario, net migration falls to 105,000 by 2021.

In their central forecast, the OBR used the ONS principal population projection, which assumed net migration of 329,000 in 2015 and 256,000 in 2016, declining to 185,000 in 2021.

The OBR projected a £16.9bn surplus in 2020-2021 under the high migration scenario, compared to £5.2bn in the low migration scenario.

Secondly, the Centre for Economics and Business Research in May 2017, found the numbers were “quite shocking”. Their analysis showed that if the UK cuts off migration without improving productivity, especially in the public sector, the scale of the economic damage could be huge.

• In the slow reduction scenario (reducing inward migration by 200,000 p.a. over 8 years from 2019), the net impact on the deficit was £9.5 billion in 2025; £25.9 billion in 2030 and £57.7 billion in 2040 (assuming public spending would be scaled to the population).
• The fast reduction scenario (reducing inward migration by 200,000 p.a. in two years from 2019, showed tax receipts down by £32.7 billion in 2025. Allowing for the reduced need for public services the net impact on the deficit was £20.0 billion in 2025; £36.3 billion in 2030 and £64.5 billion in 2040.

Sources:
Office of Budget Responsibility, Economic and Fiscal Outlook, November 2016
Centre for Economics and Business Research, Special report: economic consequences of limiting migration, May 2017
NIESR, Portes and Forte, The Economic Impact of Brexit-induced Reductions in Migration, December 2016

Government White Paper

The government published its long-delayed White Paper on immigration on 19 December 2018. The recommendations were subject to 12 months consultation.

The White Paper failed to acknowledge that Brexit is removing the benefit of Freedom of Movement from 65 million UK citizens. UK citizens who want to live and work in Europe are likely to be subject to the visa requirements of the country they want to live in. This is also likely to apply to UK expatriates already living in Europe who wish to move between EU countries.

The paper reflected recommendations from the MAC to prioritise higher skilled people and to avoid preferential treatment for EU citizens. The White Paper:

• Aims for migration to reach sustainable levels but does not include a numerical target.
• To prioritise skilled workers, proposes no cap on workers earning over £30,000 a year.
• Proposes no limits on unskilled migrant workers from low-risk countries but limits their stay to 12 months with no access to social security benefits.

To avoid cliff-edge effects after Brexit, the government says it would implement new rules in a phased approach from 2021.

The paper recognises the need for flexibility in future trade negotiations, where the UK is likely to experience pressure to relax immigration rules.

in February 2020, the government announced new rules to apply from January 2021.

EU Settlement Scheme

For EU citizens living in the UK, a new EU Settlement Scheme requires EU citizens to apply for permanent residence in the UK once free movement has ended. The government has assured citizens that this scheme will still be used in the event of no-deal.

The Settlement Scheme, allows those who have been in the UK for five years to receive Settled Status and those who have been here less than five years to hold pre-Settled Status until they meet the requirement.

EU citizens can apply for residency online, and the Scheme requires less documentary evidence than the previous system for applying for permanent residence.

Please go to ‘Implementing the Withdrawal Agreement” in 2020 Negotiations for details on progress.

Source: HMG, The UK’s future skills-based immigration system, December 2018

Last updated on 25th January 2023 by Richard Barfield