The population could shrink by 2% after the coronavirus pandemic if “missing” migrant workers do not return to the UK or are not replaced, a watchdog has warned.
This poses a “risk to potential output in the longer term”, the Office for Budget Responsibility (OBR) – which analyses the country’s economic forecast – said in its latest report as it cited research which suggested up to 1.3 million people may have left the UK during the pandemic.
According to the document, analysis of labour market data suggests the population may be “substantially smaller” than indicated in official statistics because of the “significant numbers of foreign-born nationals returning home during the pandemic and lower levels of immigration than pre-pandemic projections assumed”.
The report added: “Unless most of these ‘missing workers’ do indeed return or are replaced by other migrants after the pandemic, the scarring impact from net outward migration may be rather larger than we previously assumed.
“Indeed, on a worst-case basis the population could be as much as 2% smaller.”
While some EU migrants may return, post-Brexit changes to immigration rules are likely to make it “harder for new migrants to move to the UK”, the report warned, adding that some may no longer meet the Government’s criteria and others may be “discouraged by tighter immigration rules”.
EU nationals wishing to continue living and working in the UK must now confirm their immigration status under the EU Settlement Scheme.
At the same time, migrants wishing to come to the UK to live and work will need to obtain 70 points to be eligible for a visa under a new points-based immigration system.
Key requirements will include being able to speak English to a certain level, having a job offer from an approved employer and meeting a minimum salary threshold.
The report said: “Although the extent of net emigration is still highly uncertain, the risk to the size of the population appears to be firmly to the downside.
“Such an outcome could reduce the potential output of the economy via a lower labour supply, leading to greater post-pandemic scarring than the 3% included in our central forecast.
“This is a risk to the outlook for the public finances as a smaller economy would reduce tax receipts, amplified by the fact that migrants are more likely to be of working age and net contributors to the public finances. It would, however, reduce demands on public services.”
The “true extent of the impact of the pandemic on the population may unfortunately not be revealed until well after the 2021 census”, the OBR added.
The report comes as Chancellor Rishi Sunak announced visa reforms aimed at “high-skilled” migrants in Wednesday’s Budget.
He told MPs there would be a “new, unsponsored points-based visa to attract the best and most promising international talent in science, research and tech; new, improved visa processes for scale-ups and entrepreneurs, and radically simplified bureaucracy for high-skilled visa applications”.
The Treasury’s Budget document said modernising the immigration system will help “drive innovation, and support UK jobs and growth” as it set out changes to make the process easier and quicker for qualifying applicants.
More detail is due to be published in the summer, the document said.
Meanwhile, some campaigners hit out at the Chancellor for the lack of financial support offered to migrants and families who are not eligible for Government funding under no recourse to public funds conditions.
Satbir Singh, chief executive of the Joint Council for the Welfare of Immigrants, said the Budget announcement did not include “any protections for thousands of people who are excluded from the public safety net that’s kept so many people from falling into hardship”.