Brexit: Four Sectors Facing Immigration Impacts

Employment, Hiring, News / 25 February 2020

Last week, the Government unveiled its new immigration policy, which will come into effect in 2021. We’ll take a quick look at what this new policy says, what it means for migrant workers, and the potential impacts it could have to four sectors that are key to the UK economy.

The Points Style Immigration System

A detailed breakdown and explanation of how the new system works can be found on gov.uk, but to summarise, points are attributed to potential migrant workers as follows:

Offer of job by approved sponsor: 20
Job at appropriate skill level: 20
Speaks English at required level: 10
Salary of £20,480 (minimum) – £23,039: 0
Salary of £23,040 – £25,599: 10
Salary of £25,600 or above: 20
Job in a shortage occupation (as designated by the MAC): 20
Education qualification: PhD in subject relevant to the job: 10
Education qualification: PhD in a STEM subject relevant to the job: 20

It’s already been pointed out by some experts that this system is only likely to inflate the skills shortage and deepen problems for sectors like the NHS, which needs workers that generally won’t be able to meet the minimum 70 points needed for a working visa, due to salary or skills requirements not being met. The Government says that the Migration Advisory Committee will continually assess demands, and they will apply recommendations while offering easier access to in-demand jobs for migrant workers.

Even so, some sectors have already stated they expect to face serious workforce shortages as a result of the new immigration system, claiming that the government just isn’t approaching the situation realistically. Here’s a snapshot of some of the industries most likely to be affected by the new policy, and what this could mean in the long term for both them and the wider UK economy.

Transport and Logistics

Some of the most vocal criticism of the new immigration policy has come from this sector, and it’s easy to see why. Currently, transport and logistics companies are working to very tight profit margins – around 1 or 2%, according to the Road Haulage Association. This, combined with the already serious staffing shortages across the industry, the failure of the Apprenticeship levy to be of any actual value, and the fact that around 13% of the entire logistics workforce is from the EU, starts to paint quite a problematic picture for the sector.

The Government has stated it wants to move away from ‘low-skilled’ jobs using automation and AI, but industry experts have claimed this is a fantasy. UK Warehousing Association CEO Peter Ward suggested that ‘..while it is true that the use of automation is growing across the logistics industry, there are many roles within a typical warehouse operation that remain difficult to automate. Although recent developments have made automation more scalable and flexible, for many warehouse operators the outlay on the type of fixed assets found in automated systems, is impossible to justify. Furthermore, automation does not replace a workforce, but creates new jobs with different skills, which needs investment in training and cannot be achieved overnight.’

While Priti Patel has claimed that any staffing gaps can be filled by the 8 million economically inactive people in the UK, things aren’t so simple in reality. Firstly, those categorised as ‘economically inactive’ are mainly students, retirees, and those that are unfit to work. Secondly, despite the ‘low-skilled’ designation, HGV driving requires around £5000 of training investment. This cost will be difficult to absorb for transport firms given the tight margins. What’s more, attracting younger drivers is proving difficult, with less than 1% of HGV drivers under 25.

Travel and Tourism

The travel and tourism sector is a major employer of ‘low-skilled’ workers, especially from abroad. While there are efforts in place to try and recruit more UK workers for the roles available in this industry, the simple fact is that many Brits just don’t want to work in lower-paid service jobs. This need has so far been met by foreign workers, many of whom are from the EU. Lex Butler, chair of the Hotels Booking Agents Association, compounded this: ‘The ‘economically inactive’ suggested by the home secretary are not the solution. We are already making every effort to encourage them to take up the many exciting career opportunities in our industry, but the UK unemployed aren’t interested in lower-paid ‘service jobs.’

Tourism in the UK currently generates around £146 billion, contributing around 3 million jobs. Despite being such a large contributor to the economy, the Government seems to have overlooked the importance of this sector according to analysts and industry leaders. The focus is often on bringing in workers with PhDs or strong grades in STEM subjects. This is, however, at odds with the actual reality of what composes the UK workforce.

In response to the government’s preference for using technology to alleviate the potential shortage of ‘low-skilled’ workers, Julie Grieve, CEO of tech provider Criton, had this to say: ‘Within the government report they cite ‘wider investment in technology and automation’. Technology has an enormous role to play within our industry and as yet it remains mostly untapped, but it’s there to support guests and staff, to streamline operations and increase revenue. It fundamentally underpins what makes businesses such as hotels more efficient. But it’s our hospitality workers and colleagues who drive our economy, provide that ‘warm welcome’ recognised around the world and deliver a reason for visitors to return to the UK time and time again.’

Waste and Recycling

Official government estimates suggest that around 70% of the recycling and waste management workforce is made up of EU nationals. The salary threshold is the main cause for concern for this sector, as many immigrant workers will be locked out from these jobs come January 2021. Much like the logistics and transport sector, the loss of capable drivers is a serious concern here as well. Attracting UK workers is once again proving a challenge due to low salaries, and there’s no reason to think this will change after the immigration rules come into effect.

According to Matt Spaul, MD of the managed service division at Smart Solutions: ‘The waste and resources industry is heavily reliant on the EU migrant workforce, especially in MRFs or for collection crews and drivers. This just adds to the pressures we’re already experiencing – there’s already record low unemployment in the UK, and it’s difficult to attract candidates to an unsexy industry. While the industry typically pays the national living wage or even higher, there aren’t many highly-paid roles. This means the £25,000 threshold doesn’t help as the majority of workers will not meet it.’

There are similar concerns from the recycling industry, with Alan Wheeler, director of the Textile Recycling Association stating that the industry needs special provision to recruit picking line and forklift operators: ‘If we do not get special dispensation, not only will we not be able to develop sorting operations here, but will probably force many to close or move off-shore, making it even more difficult for us to trace what happens to clothes. It could also result in a serious impact on the government’s climate change commitments. Priti Patel and the home office need to stop working in their silo, get a grip on how their blinkered decisions will have serious impacts on their own government’s commitments and priorities and actually take heed of what the industry leaders are telling her.’

Food and Retail Manufacturing

The British Retail Consortium has expressed reservations about the new scheme, and like many of the already mentioned sectors above, cites supply chain workers as the key potential problem area. ‘Retailers rely on complex supply chains and for these to function effectively must be able to access an adequate supply of workers. Although we welcome the reduction in the salary threshold, it is disappointing that the Government has not understood the needs of the economy and the vital contribution of workers supporting the operation of warehouses, food factories and city-centre stores.’, according to the BRC’s Tom Ironside.

Once again, the Government’s assertion that technology can be used to replace gaps in the workforce was called into question. The sector is certainly ‘..committed to promoting the use of automation and technology..’ said Mark Harrison, Policy Manager at the Food and Drink Federation, but that ‘..such innovations will not be felt overnight and some food chain roles remain challenging to automate.’

Mr Harrison also went on to say that he believed the best approach would be to create a way for ‘low-skilled’ workers to benefit from an immigration policy that allowed for incentivised upskilling. As is the case for many other industries, the sector wants to avoid increased costs for labour, which will certainly have an impact on everyday food and retail costs for consumers.

Common Themes, Challenges and Impacts

There are a few key takeaways from all this as follows:

The Government clearly hasn’t listened to, or looked at, which industries are going to be affected by these immigration changes.
Replacing labour with automation and technology will take longer than one year, and may not even be a viable option in some cases, meaning it is not a solution to a workforce/labour shortage
The ‘8 million economically inactive’ Brits will not fill the skills or workforce gap alone, meaning they are not a solution to a workforce/labour shortage.

So what are the potential effects? While we can’t know for sure, based on the overall industry predictions and warning signs, we could end up seeing one or more of the following:

We’re all going to end up paying more for things if no changes or special provisions are made, because increased labour and logistics costs will be passed on to consumers.
The government will have to backtrack on current policy and offer concessions to the above industries, and others facing the same problems.
The government will have to subsidise certain industries, which could well end up being passed on in taxation.

In conclusion, these words from Peter Ward sum things up rather succinctly: ‘..it is hard to see how any significant across-the-board pay increases for low-skilled staff could be introduced without passing on the additional costs, unless the days when online shoppers expect low priced goods with cost-free and immediate delivery become a thing of the past.’

While he was talking about the logistics industry, in particular, the same overall sentiment certainly applies to many other sectors. This isn’t the only factor at play of course – the final results of the UK’s trade talks with the EU will also be crucial, and could see even more costs lumped on to consumers as businesses struggle to cope with increased shipping costs on top of labour shortages. Hopefully, this won’t be the case.