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EU workers are returning – but maybe not for long

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EU workers are returning - but maybe not for long Posted by David Smith at 09:00 AMCategory: David Smith's other articles My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt. Every so often some figures come along which change your perceptions. This happened a few days ago. We have got used to the idea that the number of European Union nationals working in Britain has been falling. Indeed, this fall has contributed to a tight labour market and recruitment difficulties across many sectors. So, for example, during the course of 2018 there was a 61,000 drop in the number of EU nationals working in Britain, and the total was down by almost 90,000 from its 2017 peak. Having risen by an average of nearly 140,000 a year since 2004, this drop in the

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EU workers are returning - but maybe not for long

Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Every so often some figures come along which change your perceptions. This happened a few days ago. We have got used to the idea that the number of European Union nationals working in Britain has been falling. Indeed, this fall has contributed to a tight labour market and recruitment difficulties across many sectors.

So, for example, during the course of 2018 there was a 61,000 drop in the number of EU nationals working in Britain, and the total was down by almost 90,000 from its 2017 peak. Having risen by an average of nearly 140,000 a year since 2004, this drop in the number of EU workers represented quite a turnaround.

That was the story, and it chimed in with what businesses have been saying. It was a surprise, therefore, when official figures last week showed that, far from falling, the number of EU workers in Britain recorded a rise of 98,000 in the year to the first quarter. This meant, incidentally, that the cumulative rise in the number of EU nationals working in Britain since just before the referendum is 237,000, to the current total of 2.38m.

It was driven in the past 12 months by workers from Romania and Bulgaria, up by 70,000 over the year, with smaller rises of 9,000 in so-called EU8 workers – those from Poland, Hungary and the other countries which joined in 2004 – and 14,000 in workers from the longer-term EU14 Western European EU members. But it was a rise nevertheless. Does it mean the tide has turned?

Before answering that question, it is worth rehearsing why EU workers have been such a benefit for the UK economy. They have a high employment rate; 82.7% of EU migrants of working age are in jobs compared with 64.8% of non-EU foreign nationals in Britain.

They have not prevented a rise to record levels in employment levels and rates among UK nationals, have had a zero to minimal impact on wages for indigenous workers, and have been net contributors to the public finances, paying more in than they take out. Though freedom of movement has become toxic in the Brexit debate, it has been one of the great advantages of EU membership for this country, filling important gaps in the labour market.

If there is a concern about the latest figures, taking them at face value, it is the change in the mix of EU workers. Not to impugn Romanians and Bulgarians, but many of them find themselves in lower-skilled jobs, for which they are often overqualified, than earlier waves of EU migrants. Those lower-skilled jobs need to be filled but the contribution of these workers, including to the public finances, is proportionately lower.

The question is whether we should take the figures at face value, and I have to say that I smell a bit of a rat. The figures for EU nationals working in Britain are not seasonally adjusted, so have to be interpreted with care. There has in the past sometimes been an increase in the number of EU workers in the UK in the first quarter of the year, perhaps reflecting the fact that firms seek to recruit for the year in the early months.

This year, however, the jump was exceptional, 107,000 between the final three months of 2018 and the first quarter of this year. It contrasted with a quarterly fall a year earlier. It was entirely responsible for the turnaround.

What was going on? The Office for National Statistics has identified no special factors in the rise. It seems to me, however, that we might have seen the human equivalent of pre-Brexit stockpiling. Firms, in other words, rushed to recruit ahead of the initial March 29 Brexit date and EU nationals, keen to establish a foothold in the UK labour market, were keen to be recruited.

March 29 has come and gone and so might this temporary blip in the number of EU workers in Britain. It would be better if this were not so but normal service, in terms of a fall in the number of such workers, seems likely to be resumed, for familiar reasons. EU nationals feel less welcome, are uncertain about their future status and have suffered a pay cut measured in their own currencies because of sterling’s weakness. There are also often better opportunities closer to home.

The future, assuming Brexit goes ahead, and this week’s European Parliament elections will provide a lot of sound and fury about that, will bring greater difficulties for British firms in recruiting workers from other countries. In this debate, everybody loves skilled workers, and skilled migrants, but turn their noses up at the unskilled, even though there are plenty of unskilled jobs to fill.

Most people would also regard Britain’s manufacturing sector as the heartland of skills, and it is here where Britain’s post-Brexit immigration regime could bite very hard. The government is very likely to adopt a system in which there is a salary floor of £30,000 a year for both EU and non-EU migrant workers, implying that unskilled workers fall below that threshold while skilled workers are above it.

But, as Make UK, the former EEF, which represents Britain’s manufacturers, has pointed out in evidence to the government, such a floor would make it hard for firms to employ foreign workers. Currently 11% of UK manufacturing workers are EU nationals.

Nearly nine in 10, 88%, of manufacturing employees, including senior engineers, earn less than £30,000 a year. Design draughtsmen and women, who design and modify components, undertake technical calculations, and draft technical specifications using computer-aided design and manufacturing, would fit most people’s definition of a skilled occupation.

Yet, as Make UK points out, most such workers do not earn more than the £30,000 threshold, including 67% in the North West and 86% in Yorkshire & the Humber. More than 90% of all manufacturing employees in the West and East Midlands, Wales, the South West, the North East and Yorkshire & the Humber earn less than £30,000 a year.

Some would say that the response of firms to this would be to recruit more home-grown talent, and to train up more workers. But surveys show that this is the chosen route of the vast majority of businesses already, and they only turn to migrant workers when they have to.

In future, that will be much more difficult to do, and the economy will suffer as a result. The latest increase in EU nationals working in Britain, sadly, looks very much like a blip.

EU workers are returning - but maybe not for long
David Smith
David Smith is economics editor of The Sunday Times. His website is http://economicsuk.com . His latest book is Something Will Turn Up.

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