THE BLOG
03/12/2018 11:59 GMT | Updated 03/12/2018 11:59 GMT

Ending Free Movement Risks Destabilising Britain's Economy

The UK economy relies on migrant labour - radically scaling back immigration could lead to severe labour shortages, particularly in the retail, restaurant, and hotel sectors

PA Archive/PA Images

Theresa May’s letter to the nation, seeking support for her Brexit deal, contained a rallying cry to “take control of our borders by putting an end to free movement”.

Both main parties appear to accept that a backlash against immigration and free movement was a decisive factor behind the Leave vote in the Referendum two and a half years ago.

As a result, the Conservative Government and the Labour opposition have repeatedly stated their intention to end free movement after Brexit. The likely outcome of doing so was less clear.

Many of the big claims made about the impact of Brexit are superficial and unsubstantiated.

That is why set out to look beyond the rhetoric and present a careful assessment of the impact of Brexit on the UK labour market. We focused on four key issues: ending free movement, employment rights, trade unions and collective bargaining, and wider employment policy.

On many of these issues we found little evidence that Brexit would have a significant impact. For example, the UK voluntarily exceeds many of the minimum requirements on employment rights set by EU regulations and there is no evidence this would change after Brexit.

The same cannot be said for ending free movement. It goes against the entire thrust of UK labour market policy for the last 45 years.

During that time migrants arriving from the continent have brought significant economic benefits for the UK. Previous research has shown that between 2001 and 2011, migrants from the ten newest EU member states in central and eastern Europe contributed nearly £5billion to the UK economy. 

We have already seen the number of migrants arriving from eastern Europe fall for the first time since the A8 countries joined the EU. Between July 2017 and July 2018 some 47,000 east European migrants left the UK, compared to 45,000 who arrived.

Yet the UK economy has continued to rely on migrant labour. During the same period 270,000 more people arrived in the UK then left, suggesting EU migrants are being replaced by non-EU migrants.

Tougher restrictions on entry to the UK could therefore create a huge supply shortage, especially of unskilled and semi-skilled workers who do not earn the income levels that would be demanded under an Australian-style system that favours highly skilled workers.

The likely result could be wide-spread employment shortages and a significant higher labour costs.

Ending free movement is likely to hit the South East hardest. Nearly 40% of all immigrants now live in the capital, making up 38% of the capital’s population.

It is hard to envisage how radically scaling back immigration would not lead to severe labour shortages, particularly in the retail, restaurant, and hotel sectors given how dependant they have become on migrant labour.

The UK Independence Party (UKIP) has argued that unemployment or unskilled British workers could easily fill those jobs, but in reality this is far more difficult.

A disproportionate number of vacancies created by the fall-off in immigration are likely to be in the South East of England, but many available workers are concentrated in economically depressed parts of northern England, Scotland, Wales and Northern Ireland.

There are huge barriers to those low-skilled, low paid workers relocating to the South East, particularly the prohibitively high cost of buying or renting property, especially if they have families.

To address this the Government would have to adopt one of two strategies. It could reverse its policy of austerity and offer workers more financial support to relocate to London, or it has to adopt even more draconian benefit sanctions, essentially disciplining the poor to force workers to move. 

The difficulties do not end there. Many firms have found it cheaper to attract skilled workers from abroad, rather than training staff themselves.

For example, more than a fifth of nurses working in the NHS and independent health sector in the UK were born overseas, a figure than has risen sharply since training bursaries were cut.

Solving that skills shortage would take years and require huge investment in education and training.

Economically, ending free movement does not make sense and it is hard to see how either the Conservatives or Labour could deliver it effectively.

Do they risk destabilising the deeply entrenched employment model in the UK, or do they decide not to end free movement and face accusations of failing to deliver what motivated many Leave voters?

If free movement does end, UK voters could face a stark choice at the next General Election between an aggressive, deregulatory government that will increase inequality even more, or a government that needs to raise taxes well beyond current levels to invest in developing the skills the UK needs.

As the Referendum shows, when voters are asked to make such huge decisions, the outcome can be almost impossible to predict.