U.K. Employers Concerned About Brexit Migration Restrictions

(Bloomberg) -- U.K. businesses have become reliant on European Union workers and are concerned about restrictions after Britain leaves the bloc next year, according to a government-commissioned study published Tuesday.

“Employers were fearful about what the future migration system might be,” the Migration Advisory Committee said in an interim report. “Many employers in lower-skilled sectors have built a business model in which the ready availability of EEA migrant labor played an important, sometimes vital, role.”

U.K. Employers Concerned About Brexit Migration Restrictions

The U.K. has seen net migration from other EU countries plunge by more than a half since the 2016 Brexit referendum, with the decline most acute among citizens of the eight eastern countries, including Poland, that joined the bloc in 2004. That’s making it difficult for firms to fill jobs at a time when unemployment in Britain is at its lowest in more than four decades.

“The fall in the value of the pound following the referendum result and the perception that the U.K. is a less attractive place to be for a migrant appear to have made it harder to recruit EEA migrants in many areas,” the Migration Advisory Committee said.

Lower-skilled sectors have seen large increases in migrants from the European Economic Area who might not be eligible under the existing Tier-2 system, the report said. Firms were also concerned about skills shortages, and said that while training U.K. workers might be a long-term solution, they need workers from the EU to fill the gaps.

Labor Shortages

Theresa May’s government commissioned the assessment of the impact of EU workers on the British economy a year after she took office. Home Secretary Amber Rudd had asked the committee to assess the economic role of EU nationals as plans are developed to control migration from Europe after Britain leaves the bloc in March 2019.

The report Tuesday summarizes evidence the committee received from more than 400 businesses, industry bodies, government departments and other organizations between August and October last year. The final report is due in September.

Immigration was a key reason why Britons backed Brexit –- there are about 3 million EU citizens living in the U.K. –- and May is pledging to reduce total net migration to the tens of thousands. But industries such as farming, food and hospitality are already reporting labor shortages.

‘Pervasive Uncertainty’

“Some sectors are struggling now to recruit and retain EEA workers,’’ Alan Manning, chair of the Migration Advisory Committee and a professor at the London School of Economics, told reporters. “Those problems have arisen really without any change, as yet, to migration policy. Migrants have a choice, particularly under free movement, and it can’t be assumed that they will come to the U.K. just because we or an employer wants them to.”

After negotiating a transition agreement under which the benefits of EU membership and free movement of workers will continue until the end of 2020, the government has bought itself time to develop a new immigration system.

Yet ministers have disclosed little about what sort of system they want. The Migration Advisory Committee said many employers were ill-prepared for a changing labor market due to “pervasive uncertainty” about the future.

The Confederation of British Industry said applying non-EU immigration rules to citizens of Britain’s biggest trading partner would be disastrous for the economy, with small firms hit hardest.

“We hope the government uses this evidence in designing a new system that shows Britain remains open to the world,” Neil Carberry, CBI managing director for people, said in an emailed statement.

Economic Impact

The government said it is committed to controlled and sustainable migration based on evidence from the advisory committee, businesses, universities, regional governments and the National Health Service.

“The British people want control of our borders, and after we leave the EU we will ensure that we can control immigration to Britain from Europe, putting in place a system which works in the best interests of the whole of the U.K.,’’ the Home Office said in a statement.

The advisory panel said reduced immigration would “very likely" lead to lower growth in total employment, and lower output growth, However, it would “not necessarily mean lower growth in output per head which is more closely connected to living standards." And the poorer wages paid to workers from new EU member states had not necessarily suppressed pay for Britons, it said.

©2018 Bloomberg L.P.