Why the story of falling EU migration to the UK may not be about Brexit after all

The city centre in Krakow, Poland. Transformed economies are tempting workers home and encouraging them to stay, rather than travel to the UK for jobs
The city centre in Krakow, Poland. Transformed economies are tempting workers home and encouraging them to stay, rather than travel to the UK for jobs Credit: martin-dm/Getty

The appeal of Britain could easily be dented by working in a Sports Direct warehouse in Nottingham. Not for Raluca Neag, a 30-year-old Romanian migrant.  

“I got paid the minimum wage, but it helped me to save enough to buy a house in Romania after two years of hard work in the UK,” she says. “It has been tough, but it paid off because myself and my husband have a lovely little home now that we bought with the money outright.”

Returning to Romania and the north  western city of Cluj-Napoca, Neag and her husband did not struggle to find work.

“Opportunities, especially in the IT fields, have risen a lot,” she says. “I work for a private hospital at the moment and found the job within one month on my returning to Romania. My husband found a job within days.”

But Neag is still drawn by the opportunities that being paid in pounds creates. Sterling has weakened since Britain decided to leave to the EU, but it is still worth around five times more than the Romanian leu and retains a slight lead on the euro.

Even Romania’s robust economic growth of more than 3pc for the last three years hasn’t swayed Neag. She plans to work in the UK again.

“Although I can see a massive economic change in Romania, the UK still has much more to offer. They have better salaries and a better quality of life in my opinion.”

Neag’s determination to come back to Britain makes her increasingly unusual, however. While half of EU migrants hail from Romania and Bulgaria, the overall number travelling here to work is falling.

For the first time in a decade, this year more people from the eight eastern EU countries that joined the union in 2004 left the UK than arrived.

Brexit and the uncertainties faced by EU citizens has been blamed.

But there are other factors at play. The attractions of a British job are still apparent for many Romanians and Bulgarians. They have been allowed to come to work since 2014, seven years after they joined the EU.

It is less clear cut for those hailing from Poland, Hungary and the Czech Republic and other so-called A8 countries who joined the EU in 2004. Waves of young people came here for a better life but those economies have grown and are retaining more talent.

In the year to June the number of migrant workers from the A8 fell by 117,000 to 880,000. It was the largest annual fall since records began in 1997 and the second since 2016.

Businesses are concerned. They want more people like Raluca Neag in the British labour market. With record low unemployment, companies are finding it increasingly difficult to find the workers they need. Skills shortages in some industries, particularly in sciences and engineering, are becoming acute.

Dorota Gorczynska went back to Poland a few months ago after 10 years working in Britain.

She says Brexit uncertainties were a factor, but that more mundane forces also drove her decision.

The Gdansk University graduate swapped frustrated ambitions of buying a flat in London and a stressful commute for a 20 minute stroll to her Krakow office.

“Accommodation is a much smaller share of your pay. You can save, and look at [buying] property. It offers you more security.”

Rent on the outskirts of London ate nearly half of her monthly salary. Gorczynska now only spends a fifth of her income on accommodation while enjoying a city-centre location. A plum job as a project manager at HSBC in Krakow was another attraction. Her excellent English made it easier to bag the role. “This [Brexit] is the kind of situation where you think is it OK for me to stay in the UK or should I look somewhere else. I didn’t want to leave the UK but I thought I would check different markets.

“I got the job here and I realised it was a good one. It’s funny now, because at the same time I applied for Barclays in the UK.”

While sterling is still strong compared to the Polish zloty, post-referendum it is less attractive than it once was to EU workers.

Marcin Kujawski, an economist specialising in central European economies at Nomura, says that the likes of Gorczynska, who either stay at home or return, are growing. Wage growth is a trigger. Across the region it is expanding at 6pc in real terms.

“The gap between earnings in the UK and these countries has been dwindling in recent years, but living costs in the UK are far higher.”

These central EU countries have been steadily drawing investment from global companies, including banks, following EU accession. This in turn has fed growth. Now, buoyant economies have combined with other factors to bring EU migration to the UK to a six-year low.

In the years prior to the Brexit referendum migration hit a record high. Some economists believe that there was pent up demand from people to move to the UK from the likes of Bulgaria and Romania. Once those who had been waiting for freedom of movement had been satisfied, migration to the UK fell back.

“There was always likely to be a regression to the mean. Essentially you know if you’ve got a record high it doesn’t stay at a record high for long. It’s not a very sexy story. Some of it might just be the natural ups and downs that are often quite hard to explain,” says Madeleine Sumption, director of the Migration Observatory at Oxford University.

Much has been made of the drop off in the number of EU-qualified nurses coming to UK in the last two years.

However, this is not purely a result of Brexit, according to Sumption.

“There are some specific issues for nursing in the NHS that are not Brexit related. There was a change in the language requirement that the nursing and midwifery council imposed in 2016, and which appeared to lead to a massive reduction in the number of EU-trained nurses getting registered in the UK. And therefore being eligible for nursing jobs.”

While other issues may be at play in the official migration statistics, if Britain is perceived as less welcoming to migrant workers there are rival economies keen to mop up.

Competition for skilled young workers is high across the entire EU continent as its population ages. Fertility levels are falling, and according to official figures, those aged 65 years or over will account for 29.1pc of the EU’s population by 2080, up from 19.4pc in 2017. It means that retaining working-age citizens, or indeed enticing them home, is climbing the agenda for EU diplomats.

Poland’s ambassador to the UK, Arkady Rzegocki, is trying to encourage more Poles to return home. While Russian military incursions in Ukraine have triggered an influx of millions of workers into Poland, easing its labour shortages, it has not been enough to match its growth.

“We have very, very low unemployment and we need more people. So we are trying first of all to encourage Poles to come back.”

Poland’s health ministry is meanwhile urging couples to have more children. At 1.8 per female in 2015, the country has one of the lowest birth rates in the EU. Along with other EU nations and Japan it is offering financial incentives to larger families.

The tough competition for workers and the looming Brexit deadline mean that it is all hands on deck in Whitehall. Officials are composing the UK’s new independent immigration policy, which is due to be presented to Parliament at the start of the new year. According to one source at the Home Office close to its development “it’s not so much a case of Christmas being cancelled, life is cancelled”.

The policy is supposed to be built on advice from the Migration Advisory Committee (MAC). A crucial report from the group on how Brexit will affect the labour market and how a new system could best cope is due to be published next month.

The high stakes are compounding tensions between business groups and government on migration. Many employers argue the visa system and number limits for non-EU workers have exacerbated skills shortages.

Tier 2 visas are proving the most controversial. The main category for non-EU skilled workers is limited to 20,700 per year. Demand for the papers has outstripped supply each month since December 2017, and red tape associated with the current system has come under fire from employers, applicants and migration lawyers.

Specialist tech visas are now being weighed in Whitehall to target a specific area of concern, while pressure to drop Theresa May’s long-standing 100,000 net migration target is rising.

No proposal so far seems to tackle the risks posed by higher administrative burdens on EU citizens coming to work in the UK, both in skilled and unskilled roles. A work- permit scheme, intended to filter out lower skilled workers, could in fact end up acting as an additional barrier for the most desirable employees.

“Let’s say the UK Government wants to end freedom of movement and put a process in place that’s focused on more highly skilled people,” says Sumption.

“How much sand would that throw in the wheels of highly skilled EU migration, which the Government says it wants to keep?”

Low-skilled labour, particularly in areas such as hospitality, could be served by extending the so-called backpacker visa currently used by Australians and others to EU citizens. Yet fundamental questions remain as to its potential scale and scope.

While direct evidence is limited, experts believe political uncertainty has deterred some migrants to the UK. However, the demographic and economic forces within the EU meant that a crunch moment for the nation’s immigration policy was long overdue.

“Migration is a topic that causes confrontation. Many politicians are talking of limiting migration but, given the demographic challenges faced, countries should be more willing to accept it,” Kujawski says.

“The labour pool is not growing at a rate that will meet EU needs. It’s not just a challenge for Western Europe, but Eastern EU countries too. They are pretty much in the same position. The labour market will be the vantage point for how these economies develop in the years to come.”

 

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