Reducing EU migration would have ‘significant’ impact on UK GDP

A study by the National Institute of Economic and Social Research has estimated that the decrease in net immigration following Brexit could result in a reduction of GDP per capita of up to 5.4 per cent by 2030.

UK immigration GDP post-Brexit
The first authoritative study on the economic effects of a post-Brexit curb on the freedom of movement of EU citizens has concluded that result could be a reduction of up to 5.4 per cent in the UK's GDP by 2030. The study by the National Institute of Economic and Social Research (Niesr) estimates the probable impact of the British government's avowed aim of limiting the rights of EU migrants to live and work in the UK.Niesr calculated that a fall in annual net immigration of 91,000 from the EU – the 'middle-range' Brexit scenario – would result in a reduction of GDP per capita of 3.4 per cent by 2030. If the total fell by 150,000 in a 'hard Brexit' scenario, the slowdown would be 5.4 per cent.

Low-paid workers to benefit, marginally

The only beneficiaries, said the report, could be low-paid workers in construction, retail, hospitality, food processing, and agriculture, who could see their wages increase marginally by more than they would otherwise – by 0.51 per cent by 2030 under the middle-range assumption and by 0.82 per cent under the 'hard' scenario.Overall, though, Jonathan Portes, Niesr fellow and lead author of the report, said the negative impact of reducing the number of EU workers could approach that caused by the loss of trade opportunities. 

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"Prior to the referendum, a number of analyses estimated the long-term impacts of Brexit on the UK economy; but none incorporated the impacts of Brexit-induced reductions in migration," Mr Portes said."Our estimates suggest that the negative impacts on per capita GDP will be significant, potentially approaching those resulting from reduced trade." Mr Portes emphasised that, at this stage, the figures were "highly uncertain" but nonetheless provided a "useful guide" to the potential impact of Brexit.

ONS study on immigration

The study follows data released by the Office for National Statistics last week showing a record 284,000 EU nationals entered the UK in the year to June 2016 as net migration remained at a near-record figure of 335,000. An estimated 189,000 of the EU citizens arrived for work at a time the government remains committed to reducing annual net migration from both EU and non-EU countries to below 100,000. Mr Portes pointed out that the government had been careful to avoid committing itself to specifics on how it planned to go about reducing EU migration in the Brexit negotiations."However," the report said, "recent comments by the Prime Minister, Chancellor and Home Secretary suggest that the current direction of travel is for a system that does maintain some degree of European preference for highly-skilled workers and, possibly, incorporates sector-specific schemes for some other sectors where employers would struggle to fill the gaps left by the end of unrestricted free movement. "In any case, this system would be accompanied by a continued commitment to substantially reducing overall migration and maintaining (or even tightening) the current restrictions on migration from outside the EU." The study said there was "a significant body of quantitative empirical evidence with which to assess the impact of a reduction in migration to the UK".It added, "This literature suggests that reducing worker inflows would reduce overall employment (more or less one for one, since there would likely be no significant impact on native employment); would increase by small amounts wages for some low-paid groups; and would significantly reduce overall GDP per capita and productivity."

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