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The impact of Brexit’s immigration upheaval on the UK’s workforce

European American Chamber of Commerce NY

30 August 2021

By Vanessa Ganguin & Gergana Kostova-Pehlivanova, Ph.D., Senior Economist at AIG Global Economics.

The chaos of the COVID-19 pandemic has obscured as well as exacerbated the economic consequences of the UK leaving the European Union (EU) trading bloc. Perhaps nowhere more so than in the UK’s workforce.

The global mobility of the COVID-19 virus drastically curtailed the global mobility of people, all of which coincided with an end to decades of free movement between the UK and Europe – a key tenet of the uncompromising Brexit divorce agreement the UK government negotiated with the EU.

Last December, as the UK and many other countries grappled with lockdown measures, free flow of labour between the UK and the 31 countries of the European Economic Area and Switzerland came to an abrupt end. The consequences have not stopped making headlines in Britain.

Ending freedom of movement for Europeans

Estimates based on 2019 data suggest EU-born workers held 8% of all UK jobs. Those were equally split between high/medium-high skilled jobs and medium-low/low skilled jobs. As many EU nationals were employed in hospitality and other services sectors that require in-person contact, many would have lost employment during the pandemic and returned home.

Visa applications by EU nationals since the beginning of the year have been rather low. From January 1st, EU immigrants had to start applying for visas like everybody else. In the first quarter of 2021 there were actually around seven times more visa applications from Hong Kong citizens (34,300) than from the whole of the EU (5,354). This astonishing statistic is down to the December 31st 2020 cut-off for European citizens establishing residence in the UK to be eligible to apply to the EU Settlement Scheme, as well as the eligibility for around 3.4 million Hong Kong citizens to now settle in the UK in response to China’s draconian security laws in the region. Making Britain’s European neighbours jump through the same immigration hoops as migrants from other countries will have long-term consequences.

Sponsoring staff is not always the answer

Employers that rely on Europeans now require a sponsor license to sponsor new staff from the continent. Yet only a small fraction of UK employers have so far secured a license. Some do not have margins that would allow the costs and duties of sponsoring staff. Others have vacancies not on the government’s lists of workers eligible to be sponsored. For example, some care sector jobs are still not listed, despite an estimated 112,000 vacancies in adult social care in England last year.

The haulage industry is also lobbying for drivers to be added to the so-called Shortage Occupations list, allowing them to qualify for a Skilled Worker visa. The Road Haulage Association warns vacancies due to Brexit and the pandemic mean food supplies are “close to a crisis point”.

For many unskilled and semi-skilled workers, such shortages seem likely to continue unless more routes are opened. Yet there are no easy answers. The Seasonal Workers Pilot scheme allowing farm workers to spend six months in the UK has not worked well enough to prevent crops rotting on fields without the staff to pick them. The scheme was extended from 10,000 to 30,000 people this year after lobbying from farmers’ unions, but a rethink is urgently needed to protect the UK farming sector which wants a more permanent, wider solution to the end of free movement.

What new UK immigration routes should employers be aware of?

Unsponsored routes are among new immigration reforms, but mainly at the other end of the employment market. Prime Minister Boris Johnson insists Britain’s “new post-Brexit points-based immigration system” makes it easier for firms to employ the “brightest and best from around the world.” Though the UK already had a points-based immigration system for work-related visas from places not enjoying free movement, a raft of measures, some already in place, others recently announced, do facilitate immigration for highly skilled workers as well as entrepreneurs and innovators.

The Skilled Worker route rebranded the most popular work visa route in January, removing the Resident Labour Market Test, reducing the salary and skill thresholds and suspending the annual cap on sponsored worker migration. The list of shortage occupations with lower thresholds expanded too. The UK government promises to make the whole sponsoring process easier.

In addition, the recent immigration policy changes allowing many Hong Kong nationals to hold jobs of any skill level in the UK may help bridge some labour supply gaps.

Good news for highly skilled workers, graduates and entrepreneurs

The Graduate Visa launched in July was great news for employers seeking to hire international students in the UK graduating this summer without the bureaucracy of having to first sponsor them. Graduates can work or look for work for up to two years after studies (three years for doctoral graduates) after which they can join the Skilled Worker route. This is also good news for UK’s higher education institutions seeking to attract more international students in a pandemic.

No job offer is needed for the new Global Talent Visa for those excelling in academia, research, the arts or digital technology. Requirements have been eased for recipients of prestigious prizes and coronavirus researchers.

Fast-track visas for recognised scale-ups have been announced for next year. A High Potential Individual route has also been promised by the Department for Business, which also announced relaxation of some of the more onerous requirements for Innovator visas, as well as a Global Mobility Visa.

These immigration reforms are aimed at certain high-growth hubs that the government has chosen to prioritise, such as the fintech sector, where around 42% of its 76,500 workers are migrants. They are little comfort to sectors such as farms, factories, hospitality, building or transportation, which have relied on readily-available, free-moving Europeans to fill their workforces.