Brexit and the Labour Market Contents

Summary

Following the UK’s departure from the European Union controls will be imposed on the movement of workers from the EU to the UK. In the Queen’s Speech the Government pledged to introduce an Immigration Bill to bring EU nationals within current UK immigration law whilst “still allowing the UK to attract the brightest and the best”.1

The estimated average of annual net migration from 2010 to 2016 was 250,000. In the year to December 2016, net migration from the EU was estimated to be 133,000.2

The available data on migration are extremely poor. They fail to provide an accurate number of migrants entering or leaving the country or the number of migrants in work. The data, based upon flawed sample surveys, are wholly inadequate for policy making and measuring the success or otherwise of the policies adopted. The margin of error for the latest net migration statistics was 41,000. The Government must prioritise plans to improve the longstanding flaws in the data if it is to take effective control of migration.

The Minister for Immigration told us that the Government is committed to a long-term objective to reduce net migration to the tens of thousands.3 Using a strict annual numerical target to achieve this objective runs the risk of causing disruption to businesses and the economy. The long-term objective of reducing net migration to a sustainable level is likely to be best achieved by a flexible approach which can adapt to the needs of businesses and the labour market, in particular during any implementation period.

Businesses will have to accept that immigration from the EU is going to reduce and adapt accordingly. Many firms that have, quite rationally, adjusted their business models to take advantage of plentiful low-cost labour will need to raise wages to attract domestic workers or increase capital investment in automative processes. Both may lead to higher prices for consumers.

The Government can help by ensuring that the domestic workforce is trained to offer the skills that businesses need. Our warning in 2008 that the employment of migrant workers could lead to businesses neglecting skills and training for domestic workers has proved prescient.4 The Industrial Strategy needs to develop and fund an effective system of technical and vocational skills training to meet the needs of the economy and the public sector; and to incentivise research and investment in automation.

It will take time for companies to adapt their business models. The Government therefore needs to provide for a suitable implementation period during which businesses retain access to the European labour market. This is particularly important for those businesses with a high turnover of staff. It will also be necessary if the Government is to achieve some of its other policy aims, such as building sufficient numbers of new homes or boosting investment in infrastructure, given the current shortages in the construction industry.

Any new system for controlling immigration from the European Union must avoid the blunt definition of ‘high-skilled’ work that the current system for non-EU migration employs. Other countries make more sophisticated analyses of an immigrant’s skill level than whether they have been to university or not. The Government must ensure the new system gives British businesses access to the type of skilled work the economy requires.


1 Cabinet Office, ‘Queen’s Speech 2017: Background briefing notes’, 21 June 2017: https://www.gov.uk/government/publications/queens-speech-2017-background-briefing-notes [accessed 12 July 2017]

3 Q 61 (Robert Goodwill MP)

4 Select Committee on Economic Affairs, The Economic Impact of Immigration (1st Report, Session 2007–08, HL Paper 82–I)




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