How Would Brexit Affect the UK’s Economy, Education, Work and Training Systems?
David Cameron, before being elected last year, activated a manifesto pledge to hold an in/out referendum on Britain's membership of the European Union. He followed through on that promise, announcing the country will vote on the 23rd of June. He has also assured voters he will campaign with his "heart and soul" to keep Britain inside the EU, but several members of his own Cabinet will be in favour of leaving the bloc.

The Financial Times is providing full coverage on the topic, with articles, graphs and polls. The latest poll shows that the general opinion among potential voters is in favour of staying in the European Union but only slightly.

FT Poll - March
The greatest uncertainty associated with leaving the EU is that no member country has ever attempted it before, and hence this is a great step into the unknown. What would be the consequences of the UK leaving the EU? Would this have an impact on the education system, the job market and the investment in training the workforce? How will migration be affected?

Migration Data

Some have claimed that a British exit would not affect net migration, but this is assuming that the UK remains in the EEA and accepts free movement of people as one of the principles.

The key change would be the introduction of work permits by the UK. This will restrict the rights for all foreign citizens, including EU citizens, to work in Britain. This could considerably reduce the EU inflow of migrant workers, which reached a net record of 180,000 in 2015.

Between 1975 and 2003, emigration from EU countries was quite small –10,000 people a year, on average. But net influx from the EU has grown rapidly since 2012, when large numbers of migrants from southern Europe (where youth unemployment is exceptionally high) started to arrive in the UK.

Emigration and Immigration in the world
In 2004, the European Union became broader as eight countries from Eastern Europe were included. This clearly had an effect as you can see from the graph below (the dip in 2008 was due to the global recession):

Estimated Net Migration

Consequences for Training:

The UK’s recent economic success has certainly been due to her ability to attract individuals with highly specific competencies, qualities, experience, knowledge and ideas.

Data from a recent employer survey shows that organisations that have experienced business growth over the last two years are significantly more likely to employ migrant workers than companies where growth has either been steady or in decline.

The link between business success and employment of migrant workers in the past two years:

Business Success and Employment
Source: https://www.cipd.co.uk/binaries/the-growth-of-eu-labour-assessing-impact-uk-labour-market_2014.pdf

This data suggests that many employers rely on migrant workers to ensure they have the necessary skills in place to expand. As a consequence, business growth translates into more jobs for the economy as a whole.

Moreover, a report by the National Institute of Economic and Social Research on migration and strategically important skills for the Migration Advisory Committee found that: “skilled migrants often make positive contributions to innovation and productivity performance. Therefore, whenever restrictions on immigration are contemplated, it is important to assess the potential economic consequences of such restrictions.”

In some businesses, migrants offer skills additional to what is required for their role. One impact is that migrants are able to use these skills to offer new training to their co-workers. This results in migrants up-skilling teams and reducing the need to send employees on external training - which, in turn, has financial saving benefits for the business.

Highly-skilled migrants play a role in the economy that goes beyond merely filling skills gaps. This doesn’t mean that foreign workers are ‘better’ than British, just different. Recruitment of migrant workers is also just one part of many firms’ strategy for meeting their skills needs and does not necessarily reduce investment in native workers.

Consequences for Work

Work is by far the largest reason given for emigration from the EU to the UK, with around 69% of EU immigrants coming for work in the UK between 2004 and 2015.

Consequences for Work
The Labour Force Survey 2014 shows that the growth of EU-born workers has seen significant growth in migration into the UK from the EU8 countries.

Labour Force Survey 2014
Overall, of the 1.33 million EU migrants in work who have arrived since 2004, 509,000 (38%) are in occupations regarded as skilled by the Migration Advisory Committee, while 822,000 (62%) are in jobs regarded as low-skilled, including 28% in Elementary Occupations (the lowest category of low skilled employment).

Occupation Groups
Labour Force Survey Occupation Groups
Recruitment of migrants is just one part of a comprehensive approach to meeting skills needs, and incorporates training of graduates and school leavers, up-skilling existing staff, as well as working with schools and universities to improve the supply of skills in the future. British organisations will need to increase training budget if the UK leaves the EU, as they won’t be able to rely on European skilled workers.

Consequences for Education

Leaving the EU would affect the academic sector too. Today, around 15% of the UK academic workforce comes from other EU countries. More than 200,000 UK students have spent time abroad through the Erasmus exchange programme since its launch in 1987, and 125,000 EU students have attended British universities, generating more than £2.2bn for the economy and creating 19,000 jobs.

Number of EU students and staff in Higher Education

EU Students Higher Education
Source: https://www.hesa.ac.uk/

While it is true that the government would save money by not providing student loans for EU students, the UK would probably lose access to EU research funding. As Julia Goodfellow, president of Universities UK and vice-chancellor of the University of Kent, recently said: “British students benefit from being taught by the best minds from across Europe. Membership of the European Union is good for our universities and good for the science and research that improves people’s lives.”

Consequences for the Economy

Open Europe has recently conducted a study analysing the economic impact of Britain leaving EU in the mid-term. It draws two possible scenarios:
  • In the worst case, UK does not make a trade deal with the rest of EU (like Switzerland and Norway) meaning GDP could be 2.2% lower in 2030 than if the UK had remained inside the EU.
  • In the best case scenario, where the UK strikes a Free Trade Agreement with the EU, UK GDP could be 1.6% higher than if it had stayed within the EU.

Impact of UK-Brexit on the UK GDP
London has one of the world’s largest financial centre in the world. As the City has become more international, increasingly dominated by foreign investment banks and foreign employees, its focus has shifted from the UK economy towards Europe and beyond.

Today, London is home to more than 250 foreign banks, which have access to the single market under the terms of the UK’s EU membership. Financial services also represent up to 10% of the country’s gross domestic product and produce 12% of tax that goes to the Treasury.

The City is the largest exporter of wholesale financial services in the world, employing more than one million workers of which 11 per cent— more than 38,000 people — come from EU countries other than the UK.

City EU employees
In conclusion, highly-skilled migrants represent a route to access global expertise and capacity as they offer a significant brain gain to the UK economy. Migration and skills policy should recognise this potential added value to the country’s creativity, innovation and enterprise, and the foreign talent that might be prevented from benefiting the UK economy.

The UK’s knowledge economy is driven by the talents of its workforce and will only remain competitive if talent is developed, trained, valued and rewarded effectively. This capacity cannot be completely home grown. The UK has historically been a magnet for the most competent minds in the world and must continue to be so.