Graduates have led the initial post-referendum dip in EU migrant workers

The number of EU-born workers in the UK fell by 50,000 in the last three months of 2016 to around 2,300,000 – with the biggest falls taking place among graduates and those working in banking, the public sector and construction – according to new analysis published today (Thursday) by the Resolution Foundation.

The Foundation’s analysis of the latest ONS Labour Force Survey Data shows that:

This was driven by a fall of 45,000 EU8 (accession) workers and 30,000 EU14 (Western and Central European) workers. The number of EU2 (Romanian and Bulgarian) workers rose by 25,000 over the same period.

The Foundation cautions that quarterly data on migrant workers can be volatile. However, while it may be too soon to draw firm conclusions about future immigration levels, the direction of travel is consistent with other recent ONS data on net migration and National Insurance registrations.

While much of the debate on the labour market impact of lower post-Brexit migration has focused on low-skilled EU migration, the briefing note shows that the immediate post-vote change has been driven by the opposite end of the labour market – with EU-born graduates leaving the workforce.

The number of EU migrants with intermediate qualifications (who left education before the age of 21) actually rose by 20,000 in the last quarter of 2016, while the number of graduates fell by 50,000.

Looking at the changes across different sectors, the analysis shows that while there were falls across a range of sectors, including lower-paying hotels and restaurants, the biggest falls were in higher-paying finance and the public sector, along with construction.

The Foundation notes that while quarterly falls in specific sectors are not uncommon – even when overall net migration has grown – the simultaneous reduction across a range of sectors, alongside the fall in nurse registrations and growth in vacancies in construction and hotels/restaurants over the same period supports initial evidence of falls in the number of migrant workers.

It says that the combination of early signs that the number of migrant workers are already falling with a clear government objective to reduce the numbers considerably further means that now is the time for employers and policy makers to start preparing for the possibility of a lower-migration labour market.

For sectors such as agriculture, construction and food manufacturing that have been particularly reliant on lower paid migrant labour that could mean investing more in machinery, but the Foundation notes the initial evidence is that change may be coming to a wider range of sectors where adjustment will require different strategies including training that for some roles can take several years.

Stephen Clarke, Economic Analyst at the Resolution Foundation, said:

“Lower migration was one of the key issues during the EU referendum campaign, and it seems the vote has already had an effect, with the number of EU-born workers falling by 50,000 during the final three months of last year even without actual policy change.

“While it’s too early to draw any firm conclusions about post-referendum migration levels, the initial reduction looks to have been driven by graduates, with some of the fastest falls being in finance and the public sector.

“This trend highlights that labour market adjustment to lower migration levels may not just be in the lower paid sectors that have dominated much of the debate.

“With the Prime Minister making control of migration a key priority for Brexit, firms should plan for the likelihood that the availability of migrant labour in Britain falls once the UK leaves the EU. That might mean a combination of investing in machinery, or rethinking their recruitment and training policies, all of which takes time, so employers need to start preparing now.”