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UK - Slowing economy takes pressure off migrant cap

22 December 2011

The ongoing economic crisis and the resultant stagnation in the labour market mean only a tiny proportion of UK employers now say that the migration cap is having or will have a damaging impact on their organisation in the short to medium term. These findings from the Chartered Institute of Personnel and Development (CIPD) are revealed in the Institute's response to the Migration Advisory Committee's call for evidence on how the cap is currently operating.  

However, the CIPD is warning that the economic context is the key, and government will need to be ready to respond flexibly as the economy recovers if the UK wants to remain equipped with the skills and business environment required to compete internationally. The migration cap was introduced to put an annual limit on the number of non-EU (European Union) economic migrants that can live and work in the UK.
 
Having previously expressed concerns about the potentially damaging impact of the cap, the CIPD's submission makes it clear that an increase in supply of skilled workers from the UK and the EU, against the backdrop of a sharp fall in hiring intentions across all three major sectors of the UK economy, is the main reason why the government is not filling its monthly allocation of Tier 2 visas, not the cap. The small proportion of employers who say that they are affected by the cap tend to be global companies, a disproportionate number of whom are based in the City of London. The CIPD's conclusions are based on its quarterly survey of more than 1,000 employers and a series of more recent follow-up interviews with employers. 
 
CIPD evidence suggests that fewer employers have plans to hire highly skilled non-EU migrant workers in the short to medium term. The most recent quarterly CIPD Labour Market Outlook report shows that demand for migrant workers fell in the three months to December 2011 alongside a fall in overall recruitment intentions:

• The number of private sector firms planning to hire migrant workers decreased over the quarter to 23% from 32% alongside falls in the public and voluntary sectors.

• The fall in demand is particularly noticeable for highly skilled roles, such as engineering, IT and finance and accountancy professionals; roles that employers have historically hired non-EU migrant workers for.  Indeed, the number of employers reporting difficulties filling engineering vacancies fell from 24% to 19% over the same period, alongside a bigger fall in filling IT vacancies, down from 19% to 10%.

• The number of employers reporting difficulties filling accountancy or finance roles fell by a quarter, down from 12% to 9%.

• According to the same survey, London employers are more likely to hire non-EU workers than other regions of the UK, with London employers particularly keen to hire IT professionals, lawyers and senior managers or executives from outside the EU.  
 
Despite this, the CIPD argues that the number of Tier 2 visas should not be cut given the impending closure of the Tier 1 post-study worker route.  As students will have to seek employment via the Tier 2 route from April 2012, which will require the offer of employment from an employer, the CIPD argues that a freezing of the current Tier 2 visa limit for April 2012-13 would amount in real terms to a 25% decrease in the total number of non-EU skilled workers available to employers.  Even in these straitened times, a fall of this magnitude could leave many employers struggling to fill skilled vacancies.

Gerwyn Davies, CIPD Public Policy Adviser, commented "looking at migration statistics in isolation, it might look like the migrant cap now fits. However, when you consider the context, it's apparent that the cap only fits because demand for non-EU workers has fallen sharply in recent months, with more employers now looking to take advantage of the growing supply of skilled workers in the UK and the EU, especially Eastern Europe. With employment prospects set to deteriorate further in the next year, there is scant evidence that the cap is hampering or will impact on employers' ability to fill vacancies with skilled workers in the short to medium.  However, this could change quickly if the economic situation improves in the UK and EU, in which case, the government needs to be alert to raising the bar accordingly if we face a situation where the demand is exceeding supply of suitably qualified and experienced staff for highly skilled roles."

Facts on the immigration cap

• Tier 1 is now only open to non-EU nationals of exceptional talent, investors and entrepreneurs.

• The Tier 1 post-study worker route, which is open to migrants who have recently graduated from UK universities, will be closed from April 2012.  Instead, applicants will have to apply through the Tier 2 route.

• (General) route is currently subject to a limit of 20, 700 places between April 2011 and April 2012.  Tier 2 (General) applications will be restricted to graduate-level vacancies.

• The Tier 2 limit does not apply to intra company transfer applicants, who can stay in the UK for up to five years if they are paid more than 40,000 Pounds per year. Those paid between 24,000 Pounds and 40,000 Pounds will be able to enter for up to 12 months within a specified period.

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