In the past two decades, the UK has experienced a steady flow of net migrants into the economy. The 2016 Brexit vote has led to a sharp fall in net EU migration, but has been offset by a rise in non-EU migration. This net migration has had a wide-ranging impact on the UK population, wages, productivity, economic growth and tax revenue. Does net migration benefit the UK economy?
- Net Migration peaked in late 2023 at over 900,000.
- Since then net migration has started to fall.
History of Migration
Until 1990, the UK usually had met emigration. This was often emigration to countries like Australia, New Zealand, US and Canada. In the late nineteenth century it was often emigration to the Empire. Note in the 1950s and 60s, there were high levels of immigration (from West Indies, Pakistan and India), but this was offset by even high levels of emigration (people leaving)
Inflows and Outflows
We have seen a rise in both immigration and emigration. But, since 2023, we are starting to see a big fall in net migration.
EU migration
Until the Brexit vote in 2016, net migration was driven by EU migration – in particularly Eastern European countries like Poland, Czech, Romania and Hungary. But, now there are greater outflows of EU migrants than inflows. The migration surge of 2022/23 was driven by non-EU migrants taking advantage of the post-Brexit visa rules.
Traditionally non-EU immigrants are more likely to come for family reasons, whilst EU migration has been focused on work.
Impact of Net Immigration on UK Economy
1. Increase in Labour Force
Migrants are more likely to be of working age. The majority of migrants come for work or study (students) They may bring dependents, but generally net immigration leads to an increase in the labour force, a decline in the dependency ratio and increases the potential output capacity of the economy.
2. Increase in aggregate demand and Real GDP
Net inflows of people also lead to an increase in aggregate demand. Migrants will increase the total spending within the economy. As well as increasing the supply of labour, there will be an increase in the demand for labour – relating to the increased spending within the economy. Ceteris paribus, net migration should lead to an increase in real GDP. The impact on real GDP per capita is less certain.
In fact, net migration can make economic growth look stronger than it is. In the period 2005-2025, UK real GDP has increased significantly faster than GDP per head. See GDP per capita for more info.
