Immigration must be matched with investment in UK infrastructure to ease pressures | Larry Elliott


Imagine that during the election campaign Rishi Sunak announced that by 2038 he expected migration to boost the population by 3.7m – more than the current number of people living in Wales. What would your response be?

It’s a question worth asking because such an increase is precisely what has been seen since David Cameron pledged in 2010 to reduce net immigration to the tens of thousands annually. In the current parliament alone, net migration to the UK has been 2m.

One response might be that from days of yore Britain’s history has been shaped and enriched by migrants, so it makes sense to continue with a liberal response. Another would be that the economy relies heavily on workers from overseas and that without them the NHS and social care would collapse. Universities that rely on foreign students because they pay higher fees than their UK-born counterparts are facing a financial crisis.

But it’s reasonable to assume that many people would want to know whether there was a plan for coping with an increase in the population equivalent to the size of Edinburgh, Leeds, Sheffield, Nottingham, Stoke, Bristol and Cardiff combined in such a relatively short period. They might ask what the impact would be on the availability of housing, on rents in our big cities, and on school places. They would want to know what it would mean for NHS waiting lists and whether the arrival of foreign-born workers would drive down wages.

These would be legitimate questions to ask, and they are being asked not only in the UK but across the developed west: in other European countries, and in North America and Oceania alike. Nor is Britain exceptional in the size of its foreign-born population. Indeed, it is very much middle of the pack for high-income countries.

That said, large net inward migration flows are relatively recent for the UK. In almost every year between the end of the second world war and the early 1980s more people emigrated than migrated. It has only been in the past 25 years that net migration has picked up and become so important to the economy.

Initially, most of the newly arrived workers came from elsewhere in Europe, with a marked increase after the accession of the former Soviet bloc countries of eastern Europe in 2004 and another rise around the time of the eurozone crisis in the first half of the 2010s, plus another big jump post-pandemic. Since Brexit, however, the pattern has changed. The number of EU workers has fallen but has been more than offset by arrivals from the rest of the world.

There have been benefits from net migration. Well-educated and skilled workers from eastern Europe enhanced the UK’s stock of human capital. They helped to boost growth and plugged gaps in the jobs market.

Ashley Webb, a UK economist at Capital Economics, says net migration from non-EU countries has been entirely responsible for the rise in labour supply since the start of the coronavirus pandemic, and that future net migration will ease labour shortages and put downward pressure on inflation.

“Between the final quarter of 2019 and the first quarter of 2024, the labour force increased by just 200,000. Within that, the number of non-EU born people willing and available to work rose by about 1.5 million, while the number of people born in the EU and the UK fell by about 200,000 and 1.0 million respectively. Moreover, for the first time since the data series began in 1997, the inactivity rate for non-EU born people is now below the inactivity rate for UK-born people,” Webb says.

Webb is right to point out that net migration solves some short-term problems. Whether it is so good for the UK in the long term is another matter.

For a start, what matters is not the size of the economy measured by gross domestic product but the size of the economy divided by the number of people. Per capita gross domestic product fell by 1.2% between the end of 2019 and start of 2024.

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Net migration has done nothing to arrest the downward trend in per capita GDP since 2010: indeed, the availability of cheap labour may well have discouraged companies from investing in the new capital that would help boost productivity and growth in incomes.

Then there’s housing – or rather the lack of it. Housing supply has not remotely kept up with demand in recent years, leading to higher property prices and more expensive rents. A rising population is one reason why so many young people rely on the bank of mum and dad to buy their first home or end up living with their parents in their late 20s and early 30s. These pressures will persist even if the Office for National Statistics’s assumption that net migration will settle down to an average of 315,000 in the coming years proves accurate.

But that’s not to say that breaking out of Britain’s high migration-low productivity trap is going to be easy either. That requires more than just a cap on the number of people allowed into Britain each year, with a focus on attracting the most talented. It will also require recruiting far more UK-born doctors, nurses, and care workers – and paying them suitably attractive salaries.

During the election the focus is likely to be on how to stop the boats crossing the Channel, even though legal migration far exceeds illegal migration. But the reality is that high migration is being used to paper over the cracks caused by austerity and to perpetuate what would – in sectors such as hospitality and higher education – otherwise be unviable business models. Large-scale migration without the equivalent large-scale investment in the infrastructure to cope with the pressures it causes is an accident waiting to happen.

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