UK migration nation

UK migration nation

The UK has been a major net ‘importer’ of people since the 1990s, with immigration running well ahead of emigration. The UK’s foreign-born workforce increased by an average of 5% a year between 1998 and early 2020, roughly ten times the annual growth rate in the UK-born workforce.

• Brexit has had surprising results. Much-reduced levels of migration from the EU have been more than offset by rapid increases in migration from outside Europe. The net effect has been a sharp increase in net migration, reaching a record 906,000 in the year to June 2023. An easing of visa rules for non-EU workers and students, the effects of the pandemic and global events have all played a role.

• The post-pandemic recovery was marked by rising labour shortages, especially in health and social care. This coincided with a post-Brexit overhaul of the immigration system that led to a tightening of rules for EU-nationals and an easing of visa restrictions for people outside the EU. The result was a marked increase in migration by workers from outside Europe, many of them into health and social care.

• Student numbers also rebounded, reflecting a catch-up after a pandemic lull and the effect of a 2021 rule change which made it easier for foreign students to stay and work in the UK after graduation. The UK also eased travel restrictions more quickly than in competitor markets such as Australia and Canada, adding to the attractions of the UK. An additional factor was a seven-fold increase, to 136,000 in 2022, in the number of overseas residents moving to the UK as dependents of students.

• World events played a role too. In the wake of the invasion of Ukraine, the UK introduced a special visa to allow entry for Ukrainians, with the number of people entering peaking in May 2022. Amid further restrictions and controls imposed by the Beijing government in Hong Kong more residents there also chose to leave for the UK.

• The then Conservative government, having presided over a loosening of visa requirements for non-EU nationals and students, abruptly reversed course as the scale of the increase in migration in 2022-23 became clear. Changes introduced in 2024 set higher salary thresholds for work visas and restrictions on care workers and most students bringing dependents to the UK. The impact of these decisions is evident in the data which show big drops in work and study-related immigration, especially among student dependents.

• Net migration halved in 2023-24. This decline is perhaps less dramatic than it seems given that it followed a record year and left net migration running well above pre-Brexit levels.

• Long-term immigration trends reflect the interplay between policy choices and external factors over which the government has little or no influence. In the last 25 years successive governments have played a role, partly through easing visa requirements, starting with the Labour government in the 1990s, but also by drawing on overseas labour for the NHS and social care and increasing foreign student numbers. The UK, unlike most other EU countries, put no controls on migration from the new EU member states in central and eastern Europe after 2004, resulting in a large increase in migration from countries including Poland, Romania and Hungary. Geopolitical events and humanitarian crises, such as the wars in Afghanistan and Iraq and the conflict in Syria, also added to population flows.

• All countries have struggled to control immigration. Yet, as the UK experience shows, policy matters. Easier migration rules explain much of the increase in migration in the last 25 years and, especially, in the wake of the UK’s departure from the EU. Restrictions, predictably, have the opposite effect, as illustrated by the halving of migration in 2023-24. It is worth noting that while the rhetoric of most politicians in the last 25 years has been about managed or more limited migration, policy has often operated, for all sorts of reasons, in the opposite direction.

• Levels of migration have some economic impact, and generally tend to boost GDP growth (though not necessarily growth in GDP per head). But of greater importance is the composition and nature of immigration, so whether migrants work, their skills and earnings. These are the key factors in determining the effect of migration on productivity, tax revenues and the welfare of the wider population. Higher skilled, higher paid migrants contribute disproportionately in these areas. 

• The UK policy discussion on migration has ebbed and flowed over the years. The focus now seems to be on lower, more highly skilled migration. This can help growth, but it is no silver bullet. Productivity and participation rates within the existing UK workforce remain the key drivers of living standards.

OUR REVIEW OF LAST WEEK’S NEWS
The UK FTSE 100 equity index ended the week up 0.4% at 8,772. UK equities have risen 14% from the low in early April after US tariff announcements.

Economics

• The US Court of International Trade said that US president Donald Trump did not have the authority to impose his “liberation day” import tariffs. US equities initially rose on the announcement. The current tariff regime remains in place until 9 June while legal challenges are heard
• Mr Trump announced an increase of steel and aluminium import tariffs from 25% to 50%, effective from 4 June
• Mr Trump said that trade talks between the US and EU were moving in a “positive” direction, after previously threatening 50% import tariffs against the bloc
• Mr Trump also said China has “totally violated” its recent trade agreement with the US, suggesting rising tensions after a brief period of de-escalation between the two nations
• US Treasury secretary Scott Bessent said the US “is never going to default on its debt” amid growing concerns over the country’s public finances
• US entrepreneur Elon Musk announced his departure from the Department of Government Efficiency, while also criticising Mr Trump’s proposed tax bill, saying it “undermines” the work of his department
• According to the Conference Board, US consumer confidence rebounded in May driven by the US-China tariff agreement
• The US personal consumption expenditure price index, the Federal Reserve’s preferred inflation measure, fell to 2.1% in the year to March
• Trump Media & Technology Group, controlled by Mr Trump’s family, announced plans to raise $2.5bn to create a “bitcoin treasury”
• The International Monetary Fund upgraded their growth forecast for the UK economy this year to 1.2%, however also warned of “significant risks” to the government’s deficit reduction plan
• Bank of England governor Andrew Bailey urged the UK government to deepen its relationship with the EU to “minimise the negative effects” of non-tariff barriers created by Brexit
• The UK government confirmed plans to create a “backstop” in future legislation that would mandate UK pension funds to increase investment in UK assets if they failed to reach voluntary targets
• UK education secretary Bridget Phillipson announced the government’s “skills revolution” plan to provide 120,000 training opportunities in key sectors including construction and social care, costing £3bn
• UK car production fell 16% in April compared to the same month last year, due to a combination of model changeovers and international trade uncertainty
• The European Central Bank warned that homeowners who obtained a mortgage when interest rates were low will probably face rising mortgage costs until 2030. The ECB said higher repayments will be a “drag on consumption”
• EU companies in China are more concerned about a slowdown of the Chinese economy rather than a trade war with the US, according to a survey by the EU Chamber of Commerce in China

Business

• The US Department of Commerce told US software companies to stop selling their technology to Chinese organisations, in a bid to limit China’s ability to develop advanced semiconductors, the FT reports
• Revenues of US semiconductor manufacturer Nvidia rose 70% in the three months to April, compared with the same period in 2024, despite new limits on selling its products to China
• US secretary of state Marco Rubio said the US government would “aggressively” revoke Chinese student visas in attempts to increase scrutiny of foreign students studying in the US
• US goods imports fell nearly 20% in April compared with March, the biggest fall on record, highlighting how the front-loading of imports to avoid tariffs has given way to reduced demand in the wake of higher tariff rates
• Utilities company Thames Water was fined £123m by the UK water regulator OFWAT for breaking rules on wastewater operations and paying dividends despite the company’s weak financial performance
• UK housing minister Angela Rayner announced proposals to ease building rules for small construction companies in a bid to boost the UK’s housing supply
• Clothing company Shein is considering moving its planned stock market listing from London to Hong-Kong amid heightened trade uncertainty and regulatory hurdles in Europe, the FT reports
• The UK government sold its remaining stake in Nat West, ending a 17-year period of public involvement following the financial crisis bailout. The UK treasury has lost £10.5bn on the £46bn cost of buying the business
• Fast-food chain KFC said “we’ve never seen such strong demand” as it plans to invest nearly £1.5bn in the UK and Ireland over the next five years
• Car maker Toyota said it plans to shift some of its production from Japan to the UK following the economic uncertainty from US import tariffs
• Japanese car maker Nissan is planning to raise $7bn from asset sales and debt markets, including a $1.35bn UK government-backed loan, to improve its balance sheet amid falling sales, Bloomberg reports
• UK health secretary Wes Streeting said that doctors do not have public support for further strikes, as they vote on future industrial action following the government announcement of a 4% pay rise
• The UK government said it would speed up the planning process to fast track the construction of two reservoirs following increasing concerns over water security over the coming years
• Experts warned that the UK ban on businesses selling single-use e-cigarettes, which came into force over the weekend, would not be sufficient to prevent young people vaping

Global and political developments

• Mr Trump warned Israeli prime minister Benjamin Netanyahu to not attack Iran as the US is “very close” to reaching an agreement with the nation over its nuclear programme. Iran has increased its stockpile of enriched uranium by 50% since February, according to the International Atomic Energy Agency
• Mr Trump also said that Russian president Vladimir Putin was “playing with fire” following heavier Russian missile and drone attacks against Ukraine
• Ukraine launched a large-scale drone attack on four Russian air-bases, targeting strategic bomber planes used in Russian air raids
• Mr Trump offered Canada free protection under the US government’s proposed “Golden Dome” missile defence programme if it became the 51st US state, otherwise it would cost the nation $61bn to join. Canada reiterated that it would remain an independent nation
• Approximately 50,000 UK civil service jobs could be cut by 2030 following the outcome of the current public spending review, the FT reports, amid strained UK public finances
• The UK Reform Party announced proposed spending plans including removing the two-child benefit cap, reversing cuts to the winter fuel allowance for pensioners, and increasing the income tax threshold to £20,000. UK prime minister Keir Starmer said that the Reform Party is now Labour’s main opposition
• Bulgaria said it is likely to join the euro area in 2026 following delays due to inflation being above required levels and political uncertainty

And finally… a study published in Nature Scientific Reports found that AI-generated poetry is now indistinguishable from that written by humans and is even rated more favourably, particularly in areas such as rhythm and beauty – T.S. Eli-bot