Immigration and Social Security Co-ordination (EU Withdrawal) Bill

Writte n Evidence submitted by techUK (IB20)

techUK Briefing: Immigration and Social Security Co-ordination (EU Withdrawal) Bill 2019-21

Written evidence: House of Commons Public Bill Committee

17 June 2020

About techUK

1. techUK represents the companies and technologies that are defining today the world that we will live in tomorrow. The tech industry is creating jobs and growth across the UK. More than 850 companies are members of techUK. These companies range from leading FTSE 100 companies to new innovative start-ups. The majority of our members are small and medium-sized businesses.

Executive Summary

2. Last year the UK technology sector grew six times faster than any other sector, creating new jobs and opportunities for people up and down the UK [1] . Migration has been, and continues to be, a primary driver of growth within the UK’s tech sector and is critical in delivering continued innovation, competitiveness, and employment opportunities.

3. Yet, there continues to be a digital skills gap which is estimated to cost the UK £63 billion each year [2] . This gap is not unique to the UK, making tech talent in high demand across international competitive markets. Access to talent remains the number one issue for techUK’s members. It is therefore crucial that the UK remains an attractive destination for this talent. That includes creating an immigration system that is quick, efficient, and welcoming.

4. To date the tech sector has benefited from the bureaucratic ease and speed of Freedom of Movement, allowing businesses to easily recruit EEA talent. It is estimated that fewer than 2% of UK employers (31,000 businesses) hold a ‘certificate of sponsorship’ enabling them to recruit talent from overseas (via Tier 2). The move to a new points-based immigration system will therefore require a significant change for businesses, particularly SMEs. Adequate time, guidance, and support must be given to businesses to help them smoothly adapt to these changes.

5. techUK believes this is a once-in-a-generation opportunity to examine the UK’s immigration system wholesale and streamline it so it engenders public confidence, works for business and ensures the UK remains attractive to international talent. In particular, this is an opportunity to review costs associated with visas and the various charges and how they are used – for example the Immigration Skills Charge.

UK’s need for international talent

6. In 2018 the UK tech sector represented 7.7% of the UK economy, despite the UK’s chronic digital skills gap. To drive this growth the sector relies on the ability to completement domestic talent with international talent from across the globe. 13% of the UK’s digital tech workforce is international [3] – a higher rate than in other sectors.

7. Employment in the digital tech economy increased by 40% between 2017 and 2019, and the tech sector continues to grow at a rate far faster than the rest of the economy, creating 800,000 jobs last year. The UK economy could forfeit as much as £141.5 billion in GDP growth if we fail to close the digital skills gap [4] .

8. Tech companies are committed to building a strong domestic talent pipeline for example through the use of apprenticeships and industry led initiatives. Engineering and Manufacturing Technologies and ICT apprenticeships continue to remain in the top 6 sector areas of apprenticeship starts in England, with 81,000 starts in 2018.

9. 82% of all job vacancies require digital skills and research indicates that improving digital skills and ability to use digital tools could add £9.9 billion to the UK economy. This revolution is a huge opportunity to the future of the UK economy but is jeopardised if we do not have the right skills in the UK to allow the country to unleash its full potential.

10. The Government’s plans for the future points-based immigration system shows a desire to create a high-wage, high-skill economy that makes use of automation, robotics, and other productivity boosting technologies. techUK’s members are investing in training the next generation of talent, but the fact is that there are certain skills, including digital skills, that are not available in the UK, and we need them to make sure the tech sector is internationally competitive and productive.

11. As the UK looks to recover from the COVID crisis which has left millions unemployed, we believe the sector can provide opportunities for good, resilient jobs. However, the sector will always require international talent with technical skills that provide a strong return on investment. Between 2009 and 2015, 234,000 jobs in "advanced industries" (which includes tech roles) created a further 147,000 ‘non-tradable’ jobs within the local area surrounding where these advanced industries jobs were created [5] . Migrant workers therefore do not simply fill a gap, they create opportunities for domestic workers.

12. For tech SMEs, access to talent is a significant concern due to a combination of extreme competition for domestic talent, difficulty bearing the costs and administrative burdens of recruiting non-EU talent, experiencing depressed recruitment from the EU due to the uncertainties of Brexit and the perception that the UK is no longer a welcoming country. This is seen as a major impediment on growth, with one member stating: "I know of companies desperate to grow but they can’t because they cannot get the talent they need" [6] .

techUK’s recommendations for the future immigration system

13. techUK welcomes the number of steps Government has already taken to restate the UK’s commitment to science, research and innovation. The Global Talent Visa scheme, reinstatement of post-study work visas, and removal of the Tier 2 visa cap are welcome first steps. However, to remain world leading in fields such as AI and quantum, more can be done. techUK makes the following recommendations:

A digital-first and streamlined approach:

14. techUK welcomes Government’s commitment to streamlining the immigration system. At the moment it is too cumbersome and clunky for employers and employees with lots of pain points. Tech talent is in huge demand globally so any and all friction makes the UK less attractive.

15. Currently a Tier 2 visa can take 23 weeks to process, the Government must ensure that the new points-based system significantly reduces this time. This could be an opportunity to simplify this and other migration routes, given the large capacity pressure the system will now face processing EU migrants. Considering IT roles accounted for 35% of all Tier 2 applications for the year ending June 2019 [7] , this is important for the tech sector.

16. In a global race for talent it is crucial that applicants are not unnecessarily frustrated by cumbersome processes. techUK wants to ensure that Government has reliable and quality tech solutions for the future immigration system that are consistent across the entire system.

17. techUK believes the EU Settlement Scheme should be used as a benchmark for the system with regards to clarity, ease of use and deployment of technology-solutions with wait times significantly reduced.

Costs and fees of the system:

18. The current UK immigration system is one of the most expensive in the world. For EU nationals entering the UK workforce from 2021, the cost to UK firms rises from zero to around £8,400 for a five-year sponsored visa (for the main applicant only) or £9,500 if proposed increases to the Immigration Health Surcharge take effect. In comparison with Australia, France, Germany and Canada, the UK’s simple visa fees are significantly more expensive. It can cost six times as much to get a UK visa as it does to get a visa for their offices in competing EU city, even before we consider dependents or other associated costs. From January 2020, visa fees include a skills-charge fee of £1,000 per person, an employer visa fee of £610 for a visa up to three years, as well as £1,220 for a visa of more than three years, along with a £199 certificate of sponsorship.

19. The cost of a four year sponsor licence is £536 for a small business or £1476 for a medium to large organisation, with the fee to hire a worker around £7,500 for up to five years from October 2020, payable up front. Factor in a family of four and the employee, and companies are looking at fees from £28,000 to obtain settlement after five continuous years.

20. The UK must continue to appeal to the best and these high costs and fees may risk deterring global talent and may even encourage them to look to neighbouring European countries instead. As we look to rebuilding our economy, we need a tech-led recovery that ensures the UK’s place as a science superpower and remaining attractive to the world’s digital talent is key to this.

21. There is often reluctant acceptance of the skyrocketing prices of visa as companies need to hire international talent, but this is contingent on the size of the company. Tech SME leaders in techUK’s membership described recruiting non-EU staff as a "significant investment" and "beyond their capacity" [8] .

22. The future fee system also needs to be made transparent and easy to understand for both businesses and individuals. The current system is fragmented and there are a plethora of different charges and add-ons which can act as a deterrent in hiring talent. In addition to salary costs, total costs including a sponsor licence, the visa, Immigration Skills Charge and Immigration Health Surcharge make recruiting overseas workers more challenging.

23. techUK wants to see a simplification of fees and processes for both employers and individuals, with members proposing implementing a ‘manage my visa/application’ function in the system where applicants can see the process made and the fees accumulated, to make this process more manageable and transparent.

24. techUK would like to open a discussion in the way in which the Immigration Skills Charge is used and whether it is the most effective way for companies to be a part of skills development in the UK. For the year 2017-18, income from the Immigration Skills Charge contributed £75 million to the Department for Education’s skills budget [9] . This levy is said to help to maintain the department’s existing skills budget and existing level of investment in skills in England but currently it is not clear where the funds from this charge are going in terms of skills training.

25. The Conservative Manifesto 2017 included plans to double the Immigration Skills Charge from £1,000 to £2,000 per year by the end of 2022 [10] . Therefore, techUK would recommend that ahead of any increase that the Government take steps to provide transparency in the current way the Immigration Skills Charge is spent. techUK believes that the Immigration Skills Charge should be more robustly ringfenced to pay for skills training in the UK.

26. Using this money to clearly invest in skills and retraining for regions across the 4 nations is key in addressing national and local productivity challenges, and providing greater transparency would build employer confidence not only in a future immigration system but also in the Government’s commitment to the domestic skills agenda.

Time and support to adapt:

27. The new system will place significant burdens, particularly on SMEs who have previously never had to engage with the Tier 2 process or immigration system. Government must give businesses time, guidance and support to adapt to a new system and also ensure that UK businesses have access to the workers they need to aid economic recovery.

28. For those small companies who currently have avoided the Tier 2 system, instead relying on talent they will need to significantly adapt to the new system – first gaining a Certificate of Sponsorship to allow them to bring in international talent and then navigating what can be a complex system. Fewer than 2% of UK employers (31,000 businesses) hold a certificate of sponsorship. For businesses that rely on overseas talent or face skill shortage s, they will need to apply for licences promptly.

29. techUK would urge the Government to move quickly to put in place support structures for businesses who currently may not possesses the right administrative permissions or capacity, to help them engage and navigate the new system and ensure there is a phased approach that does not put SMEs at a disadvantage when recruiting international talent.

June 2020