The UK government’s recent measures to limit international student and overseas worker access are projected to cost businesses over £40 billion, according to official estimates.
These findings, as reported by Financial Times, emerge as the Labour government under the prime minister, Sir Keir Starmer moves forward with policies aimed at reducing immigration, initially introduced by the previous Conservative administration.
Times reports that the Home Office’s impact assessments indicate significant financial implications for the UK economy.
The assessments highlight that changes in visa sponsorship rules for skilled workers, implemented in April, will result in a £37.4 billion cost to businesses over the next decade.
This cost stems primarily from anticipated increases in salaries that employers will need to offer to attract talent.
Economic Impact of New Rules
Times reports that the assessments reveal a modest fiscal saving from decreased public service spending; however, this does not balance out the projected economic losses.
This means that while the government expects to save some money due to reduced spending on public services as a result of the immigration curbs, these savings are not enough to offset the larger economic losses projected from the measures.
In other words, the financial benefits from spending less on public services do not make up for the overall negative impact on the economy caused by the immigration restrictions.
Reports disclosed that the overall net economic impact is estimated at £26.5 billion, indicating a substantial cost to society over the same period.
Furthermore, a new restriction barring international students from bringing family members is forecasted to result in nearly £5 billion in lost tuition fees for the higher education sector and approximately £15 billion in lost tax revenue from students and their dependents.
Despite the negative ramifications, the impact assessments suggest that adjustments to sponsored work routes could yield mild benefits.
The report indicates that the ban on dependents of care workers, a key contributor to rising net immigration since 2022, could lead to savings. The government assumes that overseas workers would continue to fill vacancies without the additional burden of family members needing education and healthcare services.
Political Stance and Future Policies
The recent regulatory changes, according to the Times, are part of a broader strategy initiated by the Conservative government in response to a record high net migration of 764,000 in 2022.
Since taking office in July, Starmer has maintained these reforms while emphasizing a desire to further reduce immigration levels, particularly regarding high-skilled workers.
Financial Times revealed that during a recent address, business leaders, Starmer assured them that he would not abruptly eliminate visa options, but expressed frustration with employers who rely on overseas hiring instead of investing in local apprenticeship programs.
Reactions from Business Groups
Business organizations have voiced concerns regarding the tightening of visa regulations. They argue that the changes could exacerbate financial struggles within the higher education sector and intensify recruitment challenges in essential industries.
The Home Office acknowledges that its estimates come with significant uncertainties, depending on how businesses and individuals adjust to the new rules.
It noted that the overall effect on public finances would be “small” over a decade, with alternate scenarios suggesting potential outcomes could vary significantly.
Trends in Skilled Worker Migration
Recent Home Office data indicates that while the influx of skilled workers has remained stable since the regulatory changes were enacted, there has been a notable decline in the arrival of care workers.
Times reports that the government has reiterated its commitment to reducing net migration, stressing that immigration should not substitute for addressing skills shortages within the UK.
Hence, moving forward, the Home Office plans to connect immigration policies with skills development efforts to mitigate reliance on international recruitment.
Financial Times states that as the Labour government advances its immigration agenda, the economic repercussions remain a significant point of concern for businesses reliant on international talent.
The dialogue surrounding these policies continues, with various stakeholders advocating for a balance between immigration controls and economic growth.