PWC: Curbing EU immigrant workers after Brexit would be ‘particularly negative’ for UK growth

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  • Restricting EU migration after Brexit could severely impact certain UK industries reliant on EEA-born workers, including construction and food manufacturing, according to new research from PwC.
  • London is most at risk of the consequences of reduced migration, since 14% of its workforce was EEA-born in 2016.
  • The UK workforce has sharply increased its reliance on EEA-born workers since 2004, rising from 2% to 7% in 2016.

LONDON – Restricting the migration of EU workers to the UK after Brexit could curtail growth and productivity, according to new research.

PwC’s latest UK Economic Outlook report said limiting future EU migration could significantly impact certain industries, including food manufacturing, construction, hotels, restaurants and warehousing. While a skills gap could be filled by enhanced training of UK nationals and automation, the report said, this will take time.

“Limiting migration from the EEA could disproportionately impact some sectors and regions. By identifying the industries and areas that could be worst affected, the government can make informed decisions on post-Brexit migration policy and target their support accordingly,” said John Hawksworth, chief economist at PwC.

Hawskworth warned limiting the migration of skilled workers from the EEA to the UK could have “particularly negative implications for longer term productivity and the UK’s international competitiveness.”

About 7% of the UK’s workforce is made up of European Economic Area (EEA) migrants, a sharp rise from 2% in 2004. As the region with the highest percentage of EEA-born workers, rising from 7% in 2004 to 14% in 2016, London is most vulnerable to a drop in migration, the report said.

According to the analysis, almost a third (31%) of the UK’s food manufacturing workforce was EEA-born in 2016, compared to 18% of the accommodation workforce and 17% of the warehousing workforce. About 30% of London’s construction workforce was also EEA-born – but a fifth of UK-born construction workers in the capital due to retire in the next five years, and there are currently 60,000 vacancies in the industry in London.

The report also found that around 30% of EEA workers were identified as high skilled in 2016, and worked as critical workers in sectors such as medicine, academia and financial services.

“While enhanced training of UK nationals and automation might be a solution in certain sectors if we look 10-20 years ahead, realistically they’re unlikely to make up fully for any large reduction in EU migrant workers over the next 5-10 years,” said Julia Onslow-Cole, global head of immigration at PwC.

However, the report found that halving net migration from the EU would likely only reduce average UK GDP per capita by around £60 per person (by 2017 values) in 2030.

“Our illustrative estimate of the long term impact of reduced net migration from the EU27 on UK GDP per capita after Brexit is negative, but relatively small compared to many other uncertainties about average UK income levels in 2030,” said Hawksworth.

PwC said its research was an “illustrative scenario,” and “not a prediction of what will actually happen to EU migration after Brexit.”

PwC analysis of ONS Labour Force Survey data. EEA here defined as the EU27, Norway, Iceland and Liechtenstein.

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PwC analysis of ONS Labour Force Survey data. EEA here defined as the EU27, Norway, Iceland and Liechtenstein.
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PwC analysis of ONS Labour Force Survey data. EEA here defined as the EU27, Norway, Iceland and Liechtenstein.