The latest immigration figures for 2022 showed another steep increase in the number of people coming to the UK. Based on the latest estimates, nearly 1.2 million people immigrated in 2022 while around 557,000 left the country, leading to a net migration figure of 606,000. This is up by 118,000 compared to 2021.
Looking at the composition of the arrivals to the UK, there have been some profound changes in recent years. The share of non-EU arrivals has doubled since 2018, jumping from 40% to 80%. In absolute terms, numbers have nearly tripled, rising from 327,000 in 2018 to 925,000 last year. EU immigration, on the other hand, has slowed dramatically, falling from 426,000 in 2018 to 151,000 in 2022. As a share of the total, EU immigration has fallen from 52% in 2018 to just 13% in 2022.[1]
Figure 1: Immigration to the UK, by region of origin
Source: ONS
These figures likely reflect broader structural changes in the make-up of the population of immigrants coming to the UK as well as specific one-off factors. The 2022 figures are still influenced by a bounce-back effect following the restrictions on the movement of people during the pandemic years. This likely explains some of the uptick in the number of non-EU immigrants coming for study reasons, which is up by 184% in 2022 compared to 2018. Immigrants arriving via humanitarian routes accounted for 19% of all non-EU immigrants in 2022, up from just 2% in 2018. This can largely be explained by Ukrainians fleeing war and British Nationals Overseas from Hong Kong coming to the UK. Away from these one-off factors, a crucial observation is that non-EU immigrants with worker visas have risen sharply from 86,000 in 2018 to 235,000 in 2022, hinting at more persistent changes in the make-up of immigrants arriving to the UK. This will likely persist even as the number of arrivals via other channels falls back.
Figure 2: Non-EU immigration to the UK, by reason for immigration
Source: ONS
Meanwhile, the Government struggles to find a consistent line on immigration. While some ministers such as Chancellor Jeremy Hunt seem to suggest that more immigration would be welcome to plug the skills gap in the UK labour market, others seek a return to the pre-2019 manifesto pledge of reducing immigration to the ‘tens of thousands’. Recent policy changes certainly don’t suggest that the Government is planning to facilitate more immigration as seen by the drastic hike in visa application fees[2], which stands in contrast to our suggestion on what should be done to encourage more immigration to the UK.[3] Instead of setting out a clear agenda on immigration, the Government seems to think it can score political points by focussing on the small boats issue, despite the comparatively small number of asylum claimants in the UK compared to other European countries.
A more clear-eyed strategy should take note of the empirical evidence on the fiscal and economic contribution of immigration to the UK. Roughly speaking, the net fiscal contribution will be the difference between taxes paid by migrants such as income tax, National Insurance and council tax, less the value of public services they receive such as benefits, pensions, NHS care or education. However, a more comprehensive assessment will also take into account the indirect impacts through the expansion of labour supply and the productivity-enhancing effects of greater diversity and creativity, especially in sectors of the Flat White Economy.
We have estimated the impact of 2022’s net migration on taxes, spending, and GDP. Using the updated data, we can also estimate the future economic impact of migration, based on the Cebr’s dynamic model developed in 2017. The assumptions of the model are set out in a Cebr Special Report[4] but are adjusted to take account of the different migration mix described in this report.
We estimate the impacts by 2025, when the full effects will have worked through, of a scenario in which 2022’s net migration figure was zero. Our modelling finds that 2025 GDP would have been 0.94% lower, tax receipts would have been £9.4 billion less, and public spending would have been £6.1 billion less. The net positive fiscal impact is therefore £3.3 billion for each year. Over 10 years this multiplies up by a factor of 10 and over a lifetime by a factor of about 20. Since these figures take account of the dynamic benefits to the economy, they are larger than the static impacts which can be calculated on the back of Migration Observatory assessments.
Crucially, economic estimates do need to be updated frequently to consider the different skills profiles of immigration cohorts. For years, evidence showed that EU immigrants are on average more highly skilled than non-EU immigrants and were therefore expected to deliver a larger fiscal benefit to the UK. However, more recent analysis by the Migration Observatory shows that foreign-born workers from North America & Oceania, India and the EU-14 are the most likely to be employed in high-skilled jobs, while those from recent EU accession countries, South Asia and Latin America were least likely to be found in such jobs. Similarly, analysis of 2020 wage data shows that the median wage of non-EU born workers stood at £31,400, almost 11% higher than the £28,400 for EU-born workers.[5] These figures show that regular assessments of the skills profile of the migrants coming to the UK will be required to improve our understanding of the economic impacts.
[1] The difference to 100% is made up by British nationals who relocate from abroad to the UK.
For more information, please contact:
Kay Daniel Neufeld, Director and Head of Forecasting and Thought Leadership
Email: kneufeld@cebr.com, Phone: 020 7324 2841
Douglas McWilliams, Deputy Chairman
Email: dmcwilliams@cebr.com, Phone: 07710 083652
Cebr is an independent London-based economic consultancy specialising in economic impact assessment, macroeconomic forecasting and thought leadership. For more information on this report, or if you are interested in commissioning research with Cebr, please contact us using our enquiries page.