Brexit and its impact on immigration to the UK
August 30 2022 - The aftermath of the Brexit referendum saw many businesses take the decision to either move large numbers of staff out of the UK and focus operations in the EU or further afield, or to close their UK operations all together. The pain was particularly acute in the City, where banks and financial services companies were quick to recognise that keeping all their eggs in the Square Mile basket wasn’t ideal.
More than 5 years on, what we’ve seen has been more a slow puncture than a blowout in the UK economy. The labour market in the UK has remained relatively strong, with unemployment steady at around 4% and new jobs being created at the rate of 160,000 in the last quarter.
Employers’ ability to fill roles at all skill levels remains challenging. The government has played around with its immigration policies in the couple of years since the Withdrawal Agreement took effect in an effort to encourage economic growth, and can claim some success in this area. Despite the loss of free movement for EU citizens, the increase in the size of the UK workforce is being driven by immigration, with the number of non-UK nationals either working or seeking work rising by around 250,000 in the past year. So, what’s new - and not so new - visa policies are driving this apparent success?
Sponsored work routes
By far the biggest driver of non-resident employment, the Skilled Worker route - formerly known as Tier 2 General - was radically overhauled in late 2020. Out went the cap on numbers, which had previously stood at around 23,000 work visas per year, and the need for employers to conduct resident labour market testing in favour of a more relaxed genuine employment test. Minimum salaries were reduced, with yet more favourable treatment for applicants under 26, those switching from UK study, and those with PhDs (particular in STEM subjects). Then in early 2022 came the addition of care workers to the UK’s shortage occupation list, opening the door to a tranche of lower-skilled roles not normally capable of sponsorship.
Working against this liberalisation of the sponsored overseas worker market? Not a great deal, beyond the relatively high cost to an employer of getting licensed and then paying significant government fees per sponsored worker. Lurking in the wings, however, are Bank of England projections envisaging a rise in unemployment to 6% by 2025 against a background of recession. The government will point to the agility of a system which allows certain job roles to be removed from the shortage list without notice, to Parliament or anyone else. Sponsored workers could well find themselves in the firing line when the economy takes a downturn.
In a bid to retain talented graduates from UK universities, and to attract students who have graduated from a list of the world’s top 50 institutions in the past 5 years, the government has introduced two or (for PhD students) three-year unsponsored graduate and high potential individual visas. This sees a return to an approach adopted around 12 years ago, which was abruptly dumped when perceived abuse of the scheme was seen to be taking place from the visa applicants. That abuse amounted to no more than graduates in the former post-study work route taking jobs at lower skill levels than the government wanted for their allotted 2 years. These routes do not lead to settlement in the UK; rather, beneficiaries will likely switch into Skilled Worker if they see their long-term future in this country.
Not to be confused with the now-withdrawn Tier 1 Entrepreneur visa, we are talking here about the range of visa routes available to those with a business idea. A Start-Up visa is available to young entrepreneurs - principally graduates of UK universities who are capable of endorsing such applications. For more established businesspeople, the Innovator route is a similar concept, requiring endorsement from an external body, typically a seed-funder or accelerator business licensed by the Home Office. Immigration lawyers find these options tricky: while in theory an Innovator can settle after 3 years, the markers their business must reach in that time - which include turnover, profit, employment and IP options - are challenging.
We’ll also include the new-for-22 Expansion Worker visa here; replacing the old Sole Representative route, this category requires sponsorship by a licensed employer. In a rather convoluted process, an overseas business with an existing UK footprint (as opposed to a trading presence) can expand its operations into the UK through the placement of an existing member of staff here, but not until the business itself gains a licence from the Home Office to act as a sponsor. Again, a route that does not lead to settlement.
This is a long-established route which has always heavily favoured old Commonwealth countries, with the vast majority of people aged 18-30 using this 2-year unsponsored work route coming from Australia, Canada and New Zealand. It remains a policy option for the government to expand youth mobility to fill vacancies in sectors which, evidence shows, have not benefited from an expanded sponsored work route, such as hospitality and retail. Currently the only European countries included are Monaco, Iceland and San Marino; opening youth mobility to citizens of EU countries, for example, could prove a real benefit to the lower-skilled economy.
Included in the suite of grandly-titled Global Mobility routes from April 2022 are revamped intra-company transferee and service supplier categories, plus a new Secondment Worker option connected to high-value commercial contracts. None are likely to impact UK immigration figures to any great extent.
Responding to labour shortages through increased immigration has always been contentious, although surveys suggest the British public put migration way down the list of political concerns in light of the cost-of-living crisis. There are clear differences to the take-up in various sectors: health relies heavily on overseas labour, hospitality and retail less so since Brexit. Costs for smaller employers are disproportionately high, and salary thresholds may be beyond them even at today’s reduced levels. Immigration will of course never go away; the point is to manage it in a responsible way, to the benefit of employers and staff alike.