Letter from the City of London Corporation
The City of London Corporation welcomes the
opportunity to contribute to the Committee's inquiry into the
economic impacts of immigration. London is experiencing an unprecedented
period of sustained high levels of international migration, of
very diverse kinds, with potentially major impacts on the growth
and competitiveness of London. In the absence of any detailed
analysis of the impact of immigration on London's economy the
City Corporation commissioned the London School of Economics to
undertake research specifically focused on the impact of immigration
on London's economy. The Committee's inquiry, which coincides
with the publication of this research, therefore comes at an appropriate
time. A copy of the report is enclosed to assist in the Committee's
deliberations but, for ease of reference, it may be worthwhile
outlining some of the key findings of the research.
London's leading role as global financial centre
is widely recognised and the presence of international talent
is one of the key factors underpinning the City's competitiveness.
For many years the City has benefited from the presence of a multinational
workforce. Evidence of this can be found in City street names
such as Lombard Street which dates back to the reign of King Edward
I when land was given to goldsmiths from the Lombardy region in
Italy. Similarly, many of the City's notable institutions such
as Schröders and Rothschilds originated from international
enterprise in the 18th and 19th centuries.
The City has remained open to talent from abroad
through to the present day with up to a quarter of its employees
estimated to come from outside the UK. The research recently published
by the City Corporation reveals that in the period 1986-2006,
London's "foreign born population" increased from 1.17
million to 2.23 million with much of that increase coming since
1998. Whereas in 1986 half of this population originated from
just six countries, it now comprises 15 nationalities. Particular
elements, such as asylum seekers and the recent influx of migrants
from the EU Accession States, have contributed to this growth
but are only minor parts of a strong trend driven by international
forces combined with London's particular attractions.
The research also found that generally, new
migrants share characteristics of relative youth, above average
qualifications, and positive ratings by employers. Migrants are
present in most types of job in London. There are concentrations
mainly from richer countries in the financial and business services.
Many work in catering and hospitality whilst A8[19]
in-migrants are particularly concentrated in construction. Those
who come from richer countries tend to remain for shorter periods
(particularly the most qualified), while those from less developed
countries are far more likely to make London their long-term home
and tend, at least initially, to take up lower status jobs than
their qualifications would warrant. Over time this differentiation
tends to disappear.
The research discusses two distinct positive
effects of migration—its "qualitative" impact
on the London labour force and economy, through diversity, flexibility,
international experience and skill sets; and its "quantitative"
contribution through expanding labour supply and thus enabling
employment growth and reducing upward wage pressure. An effect
of the concentration of migrants in the worst paid segment of
the labour market has been a significant downward pressure on
wages at the bottom end of the market. This seems to have encouraged
job growth in these occupations, but earnings among workers in
this sector have suffered, falling behind growth in the cost of
living. At the same time the gap between earnings levels for this
group in London and those in the rest of the UK has been substantially
eroded. Both employment rates and earnings among new migrants
tend to be lower than for otherwise comparable Londoners. This
suggests that their potential is not being fully used at present
by London employers.
In terms of the impact on the housing market,
the research showed that new migrants form fewer households than
British nationals, occupying less housing and live disproportionately
in the private rented sector. Over time, as incomes rise and people
become more settled, their impact on the housing market may become
more apparent but, if the migrant population remains transient,
then this longer term impact may be more limited. Nevertheless,
additional demand from those moving to the UK has put pressure
on house prices although in the private rented sector, however,
rents have remained fairly stable. There is a perception that
those moving to the UK receive beneficial treatment in terms of
housing provision when compared with British nationals which can
add to existing tensions. In reality, however, whilst there are
some migrants who may be prioritised, in particular those with
families or those in poor housing conditions, migrants are not
usually eligible for social housing immediately on entry.
Similarly, the majority of migrants use relatively
fewer public services than indigenous households and, in general
terms, are less of a burden on the public purse. There are, however,
additional pressures from the more diverse needs of migrants,
such as translation services, which have placed additional burdens
on some areas in London since the capital receives a much larger
share of the current wave of new arrivals than the rest of the
country. Since finance to secure additional local government services
is often not fully underwritten by central government, this has
resulted in some authorities having to make statutory provision
without an adequate resource base. London faces particular problems
when revisions are made to estimates of migrant arrivals (and
thus local populations), as these lead to unpredictable shifts
in central grant support to local government, the NHS and other
services. Unless this balance is redressed, the strain on local
government finances can only increase, with negative consequences
for the quality of the services they are expected to provide.
Social cohesion within London has generally remained strong during
the recent period of rapid in-migration. There is some risk that
this could change if there were a long-term mismatch between available
resources and additional spending needs.
One caveat should, however, perhaps be noted.
The researchers found that there are major limitations in the
official statistics about migrants, notably on out-migration,
whether by the UK-born or by temporary residents. Similarly, the
researchers experienced difficulties in tracking migrants' subsequent
moves within the UK. The basic facts are reasonably clear, but
the picture is complicated, and current understanding remains
only partial.
13 September 2007
19 The eight eastern and central European countries
that acceded to the Union in May 2004. Back
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