By Dr Catherine Harris, City-REDI Senior Research Fellow
Department of Strategy and International Business, University of Birmingham
As with many other issues related to the referendum, the impact remains uncertain.
Europe Day celebrates peace and unity across Europe, whilst Brexit still continues to cause uncertainty in a number of areas, threatening Europe’s sense of unity and the UK’s stability.
One area of uncertainty is the impact that the potential reduction of immigration will have on the British economy, particularly in industries which have a high proportion of migrant workers from the EU. Workers from the EU will be allowed to continue to work in the UK for the two years during Brexit negotiations, after which their future is uncertain. However, Theresa May has warned that the status of EU migrants is up for negotiation.
Research has long shown that the UK will be worse off without its immigrant workers. Ratings agency Fitch has already downgraded the UK’s credit rating to AA from AA+ with a negative outlook, hinting that further downgrades might follow. It has cited reduced immigration as one of the reasons for the UK’s weaker economy. Meanwhile, the National Institute of Economic and Social Research has said that reducing immigration by two-thirds will see the UK economy shrink 9% by 2065.
Despite EU migrants making up only about a third of all migrants in the UK, data from the Office for National Statistics shows that EU nationals constitute 64.3% of the migrant workforce in the UK. Accordingly, working age, non-UK EU nationals have a higher employment rate than both non-EU nationals and UK nationals, at 78% compared with 61.7% and 74.4%, respectively.
The public sector is the largest sector for migrants from Western Europe (EU14 nationals) at 27.6%, but only the fifth largest for nationals from A10 countries (countries that joined the EU in 2004) at 11.1%. For nationals in the rest of the world the figure is 28.1%.
For A10 countries, the largest industry sector is distribution, hotels and restaurants at 27.6%, followed by manufacturing at 19.3%. This compares to just 9.6% of UK nationals employed in manufacturing and 6.7% of rest of the world nationals.
It is clear that the sectors of public administration, education and health, hotels and restaurants, distribution and manufacturing have high levels of EU migrant workers and could be significantly impacted by Brexit.
EU immigrants make up 10% of registered doctors and 4% of registered nurses. EU immigrant nursing numbers have risen at a time when the number of British-trained nurses has fallen, plugging an important skills gap.
Campaigners who were in favour of Britain remaining in the EU argued that leaving could cause an NHS staffing crisis. One of the UK’s top economists, Stephen Nickell, claimed that the NHS would be “in dire straits” without migrant workers. Former Liberal Democrat leader Nick Clegg has previously said that the NHS will be “in serious trouble” without EU workers. UKIP, however, says that these NHS jobs could still be filled if immigration was reduced.
Restrictions on non-EU immigrants have affected NHS recruitment, suggesting that the same could happen if there were limits on EU immigration to the UK. These restrictions did not trigger a process of existing healthcare workers fleeing the UK, but it has been suggested that a skills shortage in the NHS could be caused directly through new restrictions preventing EU-born NHS staff from working in Britain, or indirectly because EU-born staff will leave the UK pre-emptively due to the uncertainty.
Migrant labourers from the EU make up more than 30% of all workers in the manufacture of food products. It is unlikely that UK nationals or migrants from outside the EU could fill such a gap.
Brexit could also leave many unfilled jobs in areas such as agriculture and hospitality, which are significantly staffed by migrants. Since many of them are taking unskilled jobs that British people don’t want, the result could be a serious labour shortage in temporary and seasonal work.
Businesses that are particularly reliant on migrant workers may therefore need to rethink their business models. It has been suggested that greater automation could help them cope with the loss of migrant workers in sectors such as agriculture and manufacturing.
The high proportions of EU migrant workers in these sectors could be used by Brexiters to argue that Britons are losing out to foreign workers who are taking their jobs. They might argue that the roles can be filled by British workers or opened up to the global market. However, we are lacking evidence that British workers or non-EU migrants have the capacity or desire to fill the vacancies that EU migrants could leave behind.
This may well leave some sectors understaffed and under-skilled and could have a negative impact on the UK economy. But the extent to which this occurs really depends on how the government decides to treat EU migrants already living in the UK as well as those who wish to migrate to the UK in the future. As with many other issues related to the referendum, the impact remains uncertain.