How UK migration curbs could shrink workforce, limit economic growth

Migration curbs could further shrink the workforce, increasing wage and price pressures and limiting economic growth

The Confederation of British Industry (CBI) has warned that the UK government’s efforts to restrict immigration could reignite inflation.

The CBI said that the economy is on track to grow by 1% this year and 1.9% in 2025. This is a significant upgrade from December's forecast and more optimistic than predictions by the Bank of England and the International Monetary Fund. Improving living standards are expected to boost household incomes and consumer spending.

Impact of migration policy

However, the CBI expressed concerns over migration policy, with both the ruling Conservatives and the Labour opposition vowing to curb foreign arrivals if they win the July 4 general election. This could further shrink the workforce, increasing wage and price pressures and limiting economic growth.

“One of the things we are really keen to do, particularly in an election year, is reset the debate around this to make sure the economic argument is in there,” said Louise Hellem, CBI chief economist. One of the big risks around this is pressure on employers in terms of labour shortages. That is potentially one of the upside risks in terms of inflation.”

Government and Labour stances

The Conservative government tightened visa rules last year to reduce net migration, which reached 685,000 in 2023, double the level before Brexit. Prime Minister Rishi Sunak has promised to introduce a legal cap to curb numbers if re-elected. Labour, leading in the polls, has also pledged to reduce migration by improving training for British workers and decreasing reliance on foreign staff.

Migration figures

Net migration, the number of people entering the UK minus those leaving, was 685,000 in 2023, according to the Office for National Statistics (ONS). Over 1.2 million people came to the UK intending to stay for at least a year, while about 532,000 left. This is a decrease from 2022's record net migration figure, revised upwards to 764,000.

Where do migrants come from?

In 2023, of the 1,218,000 migrants arriving in the UK, 10% (126,000) were EU nationals, similar to 2022's total of 116,000. Approximately 85% (1,031,000) came from outside the EU, with the top five non-EU nationalities being:

Indian: 250,000

Nigerian: 141,000

Chinese: 90,000

Pakistani: 83,000

Zimbabwean: 36,000

Impact on work and study visas

Recent immigration rules have led to an almost 80% drop in student-dependent applications in the first quarter of 2024 compared to the same period in 2023.

New policies restrict dependents’ visas, limiting international students from enrolling family members in government-funded postgraduate programmes. Students are also prevented from switching visas before completing their courses, stopping institutions from selling immigration instead of education.

Healthcare visa

Despite restrictions, dependent applications on the healthcare visa outnumbered main applicants in early 2024. Health professionals can bring dependents, but care workers now face restrictions due to unsustainable numbers. This measure, effective from March 11, requires care providers to register with the Care Quality Commission (CQC) to prevent worker exploitation.

Salary threshold changes

The Skilled Worker visa salary threshold has risen from £26,200 to £38,700. The Shortage Occupation List has been replaced with a new Immigration Salary List, ensuring migrants are not paid less than UK workers in shortage occupations.