17 January 2023

UKandEU's Portes/Springford: The impact of Brexit on the UK labour market - an early assessment

In the aftermath of the pandemic, big labour shortages in health and social care, transport and hospitality have emerged, as many foreign nationals left UK during the pandemic and fewer arrived, while inactivity rose by more than half a million.

Jonathan Portes and John Springford give an early assessment of the impact of the post-Brexit immigration system on the UK labour market. A fuller discussion of their methodology and data is available in a working paper, published here. 

Immigration was at the centre of the Brexit campaign, and the new post-Brexit system ends free movement, with a new system that favours skilled workers regardless of their country of origin. But in the aftermath of the pandemic, big labour shortages in health and social care, transport and hospitality have emerged, as many foreign nationals left UK during the pandemic and fewer arrived, while inactivity rose by more than half a million.  More recently, immigration has recovered strongly, with net migration estimated at over 500,000 in the year to June 2022.

Is the new system more restrictive, damaging migration-dependent sectors? Or more liberal, pushing up numbers overall? Now that pandemic restrictions have been over for a year, and the new system has been in force for two, it’s possible to make an early assessment of the impact on the British labour market.

We estimate how many EU and non-EU workers would have been in employment if pre-pandemic migration trends had continued. We then compare those counterfactuals to the out-turns, as measured by the Annual Population Survey. By September 2022, there was a significant shortfall of around 460,000 EU-origin workers, partly but not wholly compensated for by an increase of about 130,000 non-EU workers. The net loss of workers – around 330,000 – is 1% of the labour force.

The large shortfall of non-UK workers is in sectors that disproportionately employ less-skilled workers. Table 1 shows the results of the same estimation above, but at a sectoral level. There are large shortfalls in EU-origin workers in transportation and storage, wholesale and retail, accommodation and food, manufacturing, construction, and administration and support.

All this adds up to a big fall in labour supply in these sectors. In hospitality and administration, there are sizeable but smaller shortfalls in non-EU-origin workers too. However, in general, less-skilled workers from outside the EU held steady in those sectors. And in more skilled sectors, such as healthcare, education and ICT, more non-EU workers more than compensated for losses of those from the EU; this is especially true in healthcare, where the new system is particularly liberal.

 

 

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