Negative net migration may impact on UK employers by 2030

09 June 2017 Consultancy.uk

Professional services group Mercer has evaluated how migration to and from the UK is likely to change in light of the Brexit decision, projecting employers will struggle with the subsequent exodus projected to take place. While different scenarios point to a variety of consequences, in the face of an ageing population, a drop in net migration may see business and government coffers stretched to breaking point in order to maintain pensions and other services in the long-run.

In line with worrying global trends toward anti-migrant populism, immigration continues to be a political powder-keg in British politics, with the issue being reported as one of many reasons that the United Kingdom opted to leave the wider Europe Union for unknown waters. Following 2016’s shock referendum result, the effects of the exit on business, and the wider social fabric in the UK, remain key questions as the country braces itself for its final divorce from the Union. With two years of negotiations and a hung Parliament, following the surprise electoral capitulation of the Conservatives in June's snap general election, the details of Brexit remain largely undecided – however with Theresa May considering a coalition with the hard-line DUP in Northern Ireland, a reduction in migration between Britain and the EU seems increasingly likely.

However, while segments of the populace remain opposed to migration, concerns have been raised regarding the pragmatic consequences which will likely follow from limiting or halting arrivals, or even a net outflow from the UK.

A new report from international consulting firm Mercer, titled 'Mercer Workforce Monitor', notes that the UK faces a number of demographic challenges in the not too distant future, as the nation faces an aging population – with the number of workers required to uphold pensioners’ expectations potentially higher than the market can bear.

Migration figures

The firm’s latest migration figures, which map out the period between September 2015 to September 2016, show that net migration has fallen almost -50,000 people year-on-year to +273,000. The research meanwhile shows that around 128,000 UK citizens have left the UK, and while 71,000 returned from overseas this totalled a net exit of -56,000 British citizens.

The number of EU born migrants leaving also increased to 103,000, while growth in the number arriving slowed to 268,000. Non-EU arrivals meanwhile dropped to 267,000, while the number leaving increased to 93,000.

Immigration figures by country

The number of new arrivals from the EU14 meanwhile rose by 3,000, to around half of total arrivals to the UK at 133,000. The EU8, meanwhile, saw a decline of 10,000 in new arrivals to 58,000, while 39,000 left the UK. 43% of those leaving cited “work-related” reasons. Contrasting this trend, the number of people arriving from the EU2, continued to climb by 19,000 to 74,000.

Current workforce by industry

In terms of employment, Mercer’s paper showed accommodation and food services continued to employ the largest assortment of both EU-born and non-EU born people in the UK, at 14% and 19% of the total segment respectively, followed by manufacturing with 11% and 12% respectively. Education, health and social work and agriculture, forestry and fishing have the lowest levels of people not born in the UK, at 12%, 15% and 15%.

According to the latest workforce statistics for March 2017 though, the number of EU-born workers leaving has increased to 79,000, with a similar trend of decrease in the February statistics. The decrease highlights the possibility that net migration is falling faster than earlier predictions by the firm in its ‘base-case’ for future changes to migration in the UK as a follow on from the Brexit decision.

Change in available workforce in different models

Most industries rely, in one way or another, on migrants. Mercer’s document notes that, unless automation, productivity improvements or changes to the UK’s already high employment participation rate change, changes in net migration may make it more expensive for various industries to operate.

The firm created two potential cases, the ‘base case’ and the ‘great EU Re-migration’ case. The former sees migration fall from current levels to around 185,000 by 2020, which stays for the period thereafter. The latter sees migration fall to -50,000 by 2020, which is sustained over the following decade. The latter case would see the working population reduced by 2.5 million come 2030.

The result of a great EU migrant exodus would see a broad array of sectors lose access to large numbers of workers – manufacturing would, for instance, see reductions in the number of available workers at around 3%, with similar numbers in accommodation and food services and transport and storage. Financial and insurance activities and health and social institutions such as the NHS would also find themselves under significant pressure to access staff.

A report from consulting industry giants KPMG relatedly forecasted difficulties for the UK if the ready access to skilled labour from across the EU were to decrease as a result of a “Hard Brexit.” The paper stated that as many non-UK (41%) businesses responding considered an ideal Brexit to be one including “the UK joining the EEA, retaining full access to the Single Market and accepting the free movement of people” and was released shortly before Swiss transnational food giant Nestle announced 300 jobs would be relocated from York to Poland, in a move some believe foreshadows a coming exodus of large business as well as people from the UK’s shores.

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