Immigration Gap - Home Affairs Committee Contents


Memorandum from the City of London Corporation

  1.  The desire to restrict and reduce migrants entering the UK in response to broader public worries about the impact on jobs and communities, is recognised by the UK's financial and business services sector. There are, however, serious concerns regarding the proposed method which the City Corporation feels bound to point out. These views have typically been expressed by representatives of leading City firms and trade associations through a working group on migration issues brought together by the City Corporation. The central issue for the City is the nature of the proposed cap on those non-EU workers who are highly-skilled as a means of limiting net migration in conjunction with the existing points based system.

IMPACTS ON THE ECONOMY

  2.  The City fears that this cap, coupled with other changes to the domestic tax and regulatory environment, could exclude those individuals who typically bring tangible benefits to the UK, do not displace existing British workers, and whose talents are mobile and welcome in many other centres. These individuals could be investors, entrepreneurs, or key staff for the many international firms situated in the UK.

3.  Foreign firms locating in the UK are also likely to employ a large number of British workers. For example, foreign-owned businesses such as Goldman Sachs employ 6,000 people in London, and Bank of New York Mellon employ almost 1,000 people in Manchester—most of these jobs will be held by local workers. These individuals will also pay higher rates of tax, to the benefit of public purse. These individuals also benefit the UK economy by being here. They are likely to be trained in skills that will be passed on through training and education to British workers and businesses and, on the whole, are less reliant on public services such as education or the health service. Their spending on goods and services in the UK also benefits the wider economy.

  4.  If companies choose not to locate in the UK or move away, it is unlikely that these companies would return at a later date. This, in turn, could exacerbate the effects of the current fiscal and regulatory uncertainty which is already impacting on the attraction and retention of business. The danger in denying access to the UK for individuals covered by the cap is that international companies doing substantial business here—especially foreign owned banks and insurers—could take far-reaching decisions on the location of key people and key business areas and exclude the UK during this period of uncertainty and beyond.

IMPACTS ON BUSINESSES

  5.  The impact of the various measures proposed for Tier 1 (highly skilled) and Tier 2 (skilled with employment offer) will have inconsistent effects on those businesses affected. Reducing Tier 1 limits for the benefit of Tier 2 would benefit some City businesses but would an adverse effect on others, for example, professional services such as legal firms and many of their larger international clients who are financial services institutions. If Tier 2 "first come first served", or a pool, or auction, numbers were squeezed, this would exclude lower earners from entering the UK, to the benefit of more senior executives.

6.  Proposals for caps would see them being applied arbitrarily irrespective of business needs going forward. Any system of caps does not provide the certainty that businesses require in their forward planning. Businesses that typically spend money planning ahead for recruitment will not be able to work with a system monthly caps that are not necessarily determined ahead of those months in question. Difficulties will arise for businesses as they develop and those that develop faster than the system allows may leave the UK owing to this lack of flexibility.

INTRA-COMPANY TRANSFERS

  7.  City businesses need more time to adapt to any proposed changes to sponsorship certificates for intra-company transfers (ICTs). For example, the interim limits set by the Home Secretary in June saw many businesses' ICT allowance cut to zero—and not 15% of last year's allowance as claimed by UKBA. Many of these cuts were based on the fact that City businesses did not apply for their quotas certificates last year due to the recession, resulting in a lack of work placements within those businesses as they look to reduce their own costs. Now businesses can make those placements available once more, some firms have found that their allocations have been reduced to zero as a consequence.

8.  In place of the current arrangement, proposals which allowed for greater limits on those Tier 2 or ICT quotas whilst excluding from a cap senior executives, or those on a very short stay, would be welcome. It would, however, be preferable to see intra-company transfers set apart outside any set limits. City businesses believe that set limits on ICTs are economically damaging as those individuals are almost always economically beneficial to the UK and have typically not taken the work place of an existing UK resident. As with Tier 1 and Tier 2 "first come first served" proposed limits, ICT quotas will also affect smaller firms in different ways to larger ones.

DEPENDENTS

  9.  If highly-skilled individuals are here on a very short stay—for example, Tier 1 senior executives—dependents are unlikely to feature as a priority for them. However, retention of flexibility for Tier 2 workers could act as an incentive for businesses being able to bring key workers to the UK.

August 2010





 
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