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Economy & Business Environment Blog

Jun
17
2016

Young Brit studying in Belgium? Old Brit retired to France? EU citizen working in the UK? Brexit will harm you.

With only one week to go, the June 23 vote on the UK’s membership of the European Union is important not only for UK citizens and the British economy, but for the entire EU. A Brexit vote will significantly limit the mobility of students, workers, and businesses, whether they reside in the UK or continental Europe. Doing business or simply moving across the English Channel will become far more difficult.

1. Students will pay more. If the “Leaves” win, British students will no longer be able to register for school in Belgium and the Netherlands, where they can earn their degrees for lower fees andavoid student loans. At the same time, European students who dream of a degree from Oxford may lose access to the reduced tuition UK natives pay. The London School of Economics, to name another top UK school, charges 9,000 pounds to Britons and EU students, and almost twice as much to those coming from overseas.

2. Retired workers will pay more. And shiver more. For many of the 700,000 Britons who reside in Spain and 200,000 who reside in France, a “Leave” vote could uproot them from sunny, comfortable, and affordable retirements in southern Europe. The reason: they could lose access to both the healthcare and welfare systems of their adopted homes. Such access issues also apply to Britons are still employed in EU countries. Additionally, there will be an increased administrative burden for their employers.

3. EU workers in the UK might have to go home. The “Leave” campaign is increasingly focused on those who, every year, leave Poland, Italy and Spain to escape unemployment and earn a better wage in London or Edinburgh. There are currently 2.1 million workers in the UK from other EU countries. That number is equivalent to seven percent of the British workforce, with highest concentrations around London—and includes N’Golo Kante, the French star of the Leicester City football team. A Brexit will make them foreign workers overnight, imposing compliance burdens on businesses. The migration observatory at the University of Oxford estimates that in case of Brexit, as many as 70 percent of these workers might not be eligible for the so-called “Tier 2” visa, currently the main visa category for labor migration from outside the EU.

Even British Prime Minister David Cameron, the most prominent campaigner for the “Remains,” has promised to keep net migration from the EU below 100,000 per year. But the “Leave” camp argues that he won’t be able to keep this promise. They may be right. If the UK remains part of the EU, it cannot impose such limits on the mobility of people within the EU.

There are at least two reasons, however, why the status quo—a win for the “Stronger IN”—will ultimately benefit the UK’s economy:

1) Employment rates are higher among EU nationals compared to Britons in the UK

EU nationals who live in the UK have higher employment rates than native Britons: 83.8 versus 78.6 percent, respectively. This is mainly so because EU nationals living in Britain are mostly in the working-age bracket. This also means that proportionally they contribute to the welfare system more than locals. Moreover, EU citizens who work in the UK have very high labor force participation rates, which suggests that a large proportion of these workers is highly skilled.

Ilaira chart 1

                  Source: Eurostat and The Conference Board

2) The labor market is getting tight in the UK

The unemployment rate in the UK is currently below its long-term rate of 6.3 percent. 4.9 percent is the rate recorded in February 2016. While the joblessness rate drops, job vacancies increase: according to Eurostat (European Labor Force Survey), in the third quarter of 2015 there were 756,000 job vacancies in the UK.

In times of high unemployment one can more easily expect an anti-migration rhetoric to spread easily, but in the current economic circumstances limiting the number of EU nationals will translate into stronger pressure on private sector companies to find talent. When the labor market is tight, companies face problems not only finding, but also retaining their workers.[2]

Ilaria chart 2     

          Source: Haver Analytics and The Conference Board

 

The combination of an aging population and low and decreasing unemployment makes the risk of labor shortages for the business sector a concrete, and, soon, an urgent issue. This is true not only for the UK but for most European countries where the slow growth of productivity does not compensate for the risk of an aging and shrinking labor force. However, the issue is particularly pressing in the UK and Germany thanks to the vitality of the labor market.

All in all, an analysis of the migration issue that is rooted in data rather than emotions suggests that any limit to the mobility of people and workers within the EU would be detrimental for the British labor market, and for all Europeans with an interest in the UK.

 

[1] Migration Statistics Quarterly Report: May 2016, Office for National Statistics.

[2] See: Help Wanted: What Looming Labor Shortages Mean for Your Business, The Conference Board, April 2016.

 



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