Features - Business

The impact of Brexit on immigration and the skills shortage

In a sector heavily reliant on migrant workers and imported skilled labour, Tsige Berhanu, immigration lawyer at Keystone Law, discusses the implications of Brexit on the skills shortage.

In a sector heavily reliant on migrant workers and imported skilled labour, Tsige Berhanu, immigration lawyer at Keystone Law, discusses the implications of Brexit on the skills shortage.

Tsige Berhanu

The European Economic Area (EEA) regulation which provides for EU nationals to move freely within the EEA will cease to have effect once the UK leaves the EU and the transitional period ends.  In its place, a new domestic immigration policy will be introduced. What the new immigration policy will provide is, however, yet to be determined.

The Greater London Authorty (GLA) recently published findings showing that 45% of all construction workers in London alone are not from the UK. Concurrently, 27% are from the EU, a concerning statistic for post-Brexit Britain. And this is not unique to London. These findings have also been mirrored across regions such as Manchester, Liverpool and Leeds. But, at this stage, can we estimate the impact of Brexit and can business plan for the consequences?

The Migration Advisory Committee (MAC), an independent body that advises the government on migration issues, has been commissioned to assess the impact on the UK labour market of the UK’s exit from the EU and how the UK immigration system should be aligned with a modern industrial strategy. This is in order to provide the evidence base for UK migration after the implementation period in 2021.

Although the MAC’s final report is not due until September 2018, it released an interim update on 27 March 2018, following a call for evidence and meetings with various stake holders.

The interim update showed that employers in all sectors are concerned about the prospect of future restriction on EEA migration.

The current immigration scheme for highly skilled workers from non-EEA countries is considered by many to be very costly and highly bureaucratic. Requiring EEA national migrants to comply to these rules is therefore causing concern to many employers.

Those sectors relying on lower skilled workers are even more concerned as there is no immigration route for low skill level migration under the current rules to enable businesses carry out a comparative assessment of the possible impact.

The decrease in numbers of skilled workers seems already to be taking place. According to the latest reports from the Office for National Statistics, in the quarter ending in December 2017, there was a large fall in EU net migration with fewer EU citizens coming to the UK to work.

Furthermore, the current trend indicates that employers are increasingly relying on non-EEA national workers to fill vacancies. There has been an unprecedented over-subscription of the monthly quota for Tier 2 General certificates – (the route to skilled workers’ migration) for four months in a row (December 2017 – March 2018).

The Tier 2 General route allows employers to sponsor skilled workers from outside the EEA if they cannot fill the vacancy with a settled worker, i.e UK and EEA nationals. A job is considered a skilled job if it is a graduate level job (at least NQF6) and appears in the Immigration rules’ codes of practice for skilled work.

There is an annual limit on the number of certificates of sponsorship available under this route. The limit for 2018-2019 is 20,700 certificates, the same number as in the last few years. The annual allocation is released in batches each month. Employers will need to make a request for a certificate allocation from a specific month before being able to sponsor a non-EEA national skilled worker.  The monthly quota has only ever been reached once before since the introduction of the annual limit in April 2011. The quota being reached for an unprecedented four months in a row mirrors the finding of the Office for National Statistics and the possible decline in available skilled workers from within the EEA.

In the Tier 2 scheme, when demand exceeds the number of certificates available for a specific month, priority is given to applicants filling a shortage occupation role followed by PhD level occupations. Thereafter decisions will be made based on the salary payable in a descending order. In December 2017, jobs with salaries under £55,000 were rejected, whereas in January and February 2018, salaries below £50,000 failed to go through. March 2018 carried the highest rejection rate so far with all jobs paying less than £60,000 being rejected. This could possibly result in salary inflation, as some employers have been offering higher salaries than originally intended in order to secure sponsorships for vacancies they wish to fill.

To be given priority as a shortage occupation role, a job has to appear on the Shortage Occupations list published by the Home Office. The list has been compiled and is regularly reviewed by the MAC. Apart from being given priority for certificate allocation from the monthly allocation, shortage occupation roles are also exempt from the resident labour market test the employer needs to meet.

For all other skilled jobs that pay less than £159,600 per annum and that do not appear on the Shortage Occupation list, the employer is required to carry out a resident labour market search before offering the role to a non-EEA national.

Looking at jobs that are lower skilled in that they do not appear in the codes of practice to support sponsorship under the Tier 2 scheme, there is no existing immigration route at present that allows non-EEA nationals to take up such jobs. These roles have traditionally been filled by UK and EEA nationals. Employers who currently rely heavily on EEA nationals to fill these vacancies are, therefore, concerned about the impact future immigration restrictions will have on their ability to secure employees.

The overall response to the call for evidence by MAC showed great concern in particular in areas with lower skilled workers. The interim report from MAC showed that the EEA employment share in the construction sector in 2016 was 8.1%, an increase of 0.7% on 1997. According to the report, the evidence from the construction sector focused on what they described as the large numbers of EEA workers employed in construction as well as the high proportions of self-employed workers and the number of small and micro businesses. The sector said that the current Tier 2 system would not work for the construction sector where self-employment and small and micro businesses predominated. Some said they would like to see construction students given an automatic post-study path into employment in the sector.

We have to wait until at least the last quarter of 2018 to find out what recommendation the MAC will make to the government about the new immigration policy for workers from the EEA.  Until such time, despite the fact that the effective date for the UK’s exit from the EU is less than a year away and the transitional period is due to end in December 2020, businesses remain unable to plan for the possible impact they will face.