Will a clampdown on non-EU migrants hamper UK business growth?

15th June, 2015

Business groups have recently spoken out against David Cameron’s proposed restriction on skilled immigration from outside of the EU, warning that it would restrict growth.

Speaking in the commons on Wednesday, the Prime Minister announced that British government plans to significantly reduce immigration from outside the European Union, saying that it had become “too easy” for businesses to recruit from overseas, which has undermined those in Britain “who want to work hard and do the right thing.”

However, the Institute of Directors (IoD) and Confederation of British Industry (CBI) has criticised the Prime Minister’s proposals, highlighting the UK economy’s reliance on international skills.

Under Pressure

The Prime Minister’s announcement came weeks after official statistics were revealed, showing that net migration had risen to 318,000 in 2014, which is the highest figure since 2005 and the second highest figure on record.

Mr Cameron has fallen under increased pressure from voters, who cited immigration as a major concern in the run-up to the most recent election that saw him re-elected. Cameron had previously promised to cut net migration to “tens of thousands”, but these statistics show how widely he had defaulted on this promise.

With an EU membership referendum looming, the PM plans to negotiate with Brussels with regards to discouraging EU migration. However, these plans are likely to be met with resistance as they undermine the fundamental EU principle of the free movement of labour.

In the international labour market however, there are no such restrictions, so the government is able to move more freely.

The Proposals

Home Secretary, Theresa May has asked the government’s independent immigration advisers, the Migration Advisory Committee, to look for ways to restrict working visas to highly specialist workers in areas where there is a “genuine” skills shortage. The government also plans to limit the length of time a sector can claim to have a skills shortage.

Levies are also being considered for businesses who recruit foreign workers and it is proposed that these levies could be used to fund the training of British workers.

There are also plans to raise the salary thresholds of skilled worker visas, so that businesses are not be tempted to employ foreign workers as a means of undercutting wages. These are expected to be fast-tracked and implemented in the autumn.

The Criticism

Speaking to the Financial Times, the deputy director-general of the CBI, Katja Hall, explained that non-EU skilled migrants accounted for 0.066% of the UK labour market and that targeting this area was “not the answer”.

“We are concerned about proposals to cut skilled migration from outside the EU,” she goes on to say. “These workers who are coming in under the cap represent the most valuable form of economic migration.”

The director-general of the IoD, Simon Walker, said that the increase in the cost of visas was “essentially a tax on employing people from abroad” and thought that this was “particularly odd, given how dependent the UK economy is on international skills and expertise.”

While Mr Walker believes that the Prime Minister is “absolutely right to focus on up-skilling the domestic workforce”, he is concerned that the proposals would harm the economy in the short term and that results would only materialise “a decade down the line”, emphasising that there is “no quick fix”.