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Fall in immigrant levels likely to hit Britain’s recovery: report

Reduction in their numbers threatens to create skills shortages

25th May 2009: Britain’s recovery from the recession is likely to be hit by a fall in the number of immigrant workers.  group of economic forecasters apprehend the reduction in their numbers threatens to create skills shortages and hold back the recovery.

The impact of shortage of qualified staff will reflect itself not only on gross domestic product growth, but also threaten to obstruct efforts to rebalance the economy, with more manufacturing and less financial and other services.

The Ernst & Young Item Club, with companies from a range of industry sectors as members, says the levels of inward migration, seen over the past 10 years, will not return even after the recession has ended.

Referring to reports, the club says the economy’s dependence on imported labour was underlined by Financial Times’ research last week. It showed foreign-born workers were proving more successful at holding on to jobs in the recession than their British-born counterparts.

But the sensitivity of the issue was highlighted by a spate of wildcat strikes by construction workers at power stations, oil refineries and gas terminals in protest against the hiring of 40 Polish laggers at a site in Milford Haven, in Wales.

The club report adds official population projections assuming net inward migration will average 190,000 people a year in the long term are “far too high”.

Even before the recession there was evidence that the flow of migrants was slowing, it says. Net immigration totalled 198,000 in 2007, compared with 240,000 in 2004. It is believed the flows will continue to ease as living standards in Eastern Europe catch up with those in the west.

The report says the long-term slowdown is likely to accelerate from 2011 when other European countries relax their employment rules for migrants from the “A8” accession countries – Poland, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Slovakia and Slovenia – bringing them into line with the UK.

“As countries like Germany and France are closer to home for A8 migrant workers and more similar in terms of culture and language, the attractiveness of the UK as a destination is likely to diminish,” it says.

The report casts doubt on official projections that the integration of Bulgaria and Romania will raise net immigration to 230,000 a year in 2008-10.

Emphasizing on the need for elasticity, the report reiterates: “The sharp slowdown in immigration may weigh on both GDP growth and the attempt to rebalance the economy in the coming years, perhaps leading to skills shortages during the recovery phase, further underlining the need for policy flexibility.”
The club report says for economic growth to be maintained over the medium term, the challenge is to stabilise, or at least slow the decline in, the rate of manufacturing’s share of GDP.

It says: “The UK has begun to specialise in the high value-added sectors of manufacturing such as aerospace, pharmaceuticals and biotechnology, and policies need to be geared towards maintaining a prominent position in these and other related sectors, as well as in financial and other services.”

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