As with many aspects of Brexit, uncertainty looms over British economy and the future workforce

Dr Catherine Harris writes for the Birmingham Business School Blog:

Europe Day celebrates peace and unity across Europe, but with Brexit – the UK vote to leave the European Union (EU) – this is the last one for the UK. It will be marked amid uncertainty, threatening Europe’s sense of unity and the UK’s stability.

One of these uncertainties 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. These employees will be allowed to work in the UK for the two years during Brexit negotiations, after which their future is uncertain as Prime Minister Theresa May warns their status 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. One of the reasons? Immigration. 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.

While EU citizens are only about a third of all migrants in the UK, they constitute 64.3% of the migrant workforce. This is because 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

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.

The takeaway? Public administration, education and health, hotels and restaurants, distribution, and manufacturing have high levels of EU migrant workers and could be significantly affected by Brexit.

The NHS

EU immigrants make up 10% of registered doctors and 4% of registered nurses. EU immigrant nursing numbers have risen, plugging a skills gap as the number of British-trained nurses has fallen.

Remainers argued that leaving the EU could cause an NHS staffing crisis. One of the UK’s top economists, Stephen Nickell, said the NHS would be “in dire straits” without migrant workers. Former Liberal Democrat leader Nick Clegg summarized that the NHS will be “in serious trouble”. But the UK Independence Party insisted 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. However, a skills shortage could be spurred by new restrictions preventing EU-born NHS staff from working in Britain, or through EU-born staff leaving the UK pre-emptively due to the uncertainty.

Food production

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, with a serious labour shortage in temporary and seasonal work.

Businesses that are particularly reliant on migrant workers may need to rethink their models, possibly through greater automation.

Understaffed and Under-Skilled?

The high proportions of EU migrant workers in these sectors could be used by Brexiteers to argue that Britons are losing out to foreign workers who are taking their jobs. However, we lack evidence that British workers or non-EU migrants have the capacity or desire to fill the vacancies that EU migrants could leave behind.

So some sectors may be understaffed and under-skilled, with a negative impact on the UK economy. The extent to which this occurs 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 Brexit, all of this remains uncertain.