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Building a post-Brexit Immigration System for the Economic Recovery

Author: Marley Morris, Associate Director for Immigration, Trade & EU Relations, IPPR

The UK is set to introduce a new system for work-based immigration in January 2021. For the first time in decades, the government will apply the same rules on migration to both EU and non-EU citizens. These changes to immigration policy come at a time of extraordinary economic upheaval, as the UK government continues to wrestle with the impacts of the coronavirus pandemic and prepares for the UK’s departure from the EU single market.

This report from IPPR, funded by Trust For London, assesses the potential implications of the government’s new points-based immigration system and sets out proposals for how the system can support the UK’s economic recovery. It explores how immigration policy can be designed to facilitate the UK government’s ambitions to ‘build back better’ from the coronavirus crisis. Its recommendations focus on how the UK’s immigration system can help create high quality, well paid jobs and enhance working conditions for UK and migrant workers alike.

The report finds that there are both risks and opportunities for the new immigration system. While it is hard to predict with certainty the impact of the rules – and in the short term it is likely that coronavirus and ongoing travel restrictions will make it hard to discern the consequences for overall migration flows – there is evidence to suggest that particular sectors will struggle to recruit overseas workers under the new system.

Analysis suggests that some sectors are already highly reliant on EU workers. In food manufacturing, EU migrants make up around one in four workers, while in accommodation and warehousing and support for transport they make up around one in five. In London, EU-born workers constitute around 30 per cent of the building construction workforce.

The new system is likely to make future recruitment from the EU much harder. The main route under the new system – the ‘skilled worker’ visa – will typically require migrants to be sponsored by an employer for a job deemed at least medium-skilled and with a minimum salary of £25,600. Our estimates suggest that more than 80 per cent of EU migrants working as employees in the wholesale and retail, transport and storage, and hotels and restaurants sectors would be ineligible for a skilled worker visa under the new rules. Even where migrants are eligible, fees will run into thousands of pounds for both employers and workers. Evidence from the current ‘tier 2’ system of work visas – which bears strong similarities to the new proposed system – suggests that the vast majority of visas sponsored are concentrated in information and communication, financial and business services, and health and social work. Other sectors are likely to find it far harder to recruit from abroad.

Analysis also suggests that the impact of the new points-based system will vary by sector. Some sectors such as technology and finance will be relatively protected. Other sectors such as hospitality will have few vacancies available in the short- term due to the effects of the pandemic, so the implications are likely to be limited. However, in some sectors where the economic prospects are more positive – such as manufacturing, logistics, and construction – employers may struggle. In construction, for instance, employers will not be able to sponsor workers for jobs such as road construction operatives, cable layers, and dryliners. While the government’s priority will be to support unemployed UK workers into these jobs, it is likely to take some time to retrain and up-skill workers for them to fill such vacancies. The new restrictions could therefore inhibit recruitment in key sectors, including construction, food processing, and social care.

Some have argued that restrictions on migration could benefit UK workers. In the long run, this is unlikely. This is because there are not a fixed number of jobs in the economy. Migration does not only increase the supply of workers; it can also increase demand for workers – for instance, by increasing consumer demand for goods and services, or by encouraging businesses to expand production in sectors employing many migrants. Indeed, empirical research has found that in the long run migration has no significant impact on overall wages or unemployment.

Analysis also finds that there is a risk that the new immigration system could lead to an increase in poor working practices and exploitation. Unscrupulous employers who were previously reliant on EU workers could turn to informal work arrangements to fill vacancies, placing migrants in more vulnerable situations. There is already evidence of migrants being subject to substandard working conditions: a study from Focus on Labour Exploitation (FLEX) of migrant construction workers in London found that around half had no written contract and around one-third had experienced physical or verbal abuse at work. Our interviews with migrant workers found a range of instances of pre-existing poor practices, including unfair deductions, inadequate health and safety measures, and firing and hiring on weaker terms and conditions.

However, there are also opportunities in rolling out the new system. Introducing the new policy provides a chance for the government to design it in such a way to tackle some of the UK’s deep economic challenges. In particular, one of the assets of points-based systems is that they are flexible; different points can be assigned to different criteria, and there are different ways for applicants to score the minimum points requirement. This means that the government can finesse the scoring system to help it address its preferred objectives.

The report puts forward six main recommendations to the Home Office to both address the risks of ending freedom of movement and maximise the opportunities of introducing a new points-based system. These proposals aim to help spur the economic recovery by supporting key sectors to grow, while protecting against a race to the bottom on workers’ rights.

IPPR report cover

03 November 2020

Building a post-Brexit Immigration System for the Economic Recovery