How the points-based immigration system will impact UK businesses

There are just 9 months to go until the UK’s proposed Australian-style points system comes into effect. The only difficulty is that nobody knows quite how it will operate, or what its criteria will be. On 1 January 2021, freedom of movement with the EU will end, meaning EU citizens will be treated the same as immigrants from elsewhere. Speaking at the UK-Africa Investment Summit on 20 January 2020, Prime Minister Johnson said this meant UK immigration would become “fairer… treating people the same wherever they come from”.

Mr Johnson’s proposed Australian-style points-based immigration system has however met with considerable criticism from UK business groups. Many fear being left without the labour they badly need and that uncertainty is impacting investment. On 9 December 2019, the Director General of the British Chambers of Commerce, Adam Marshall, Mr Marshall told the BBC’s Today programme, “simply saying you’re going to have an Australian-style, points-based system – without giving businesses a route map for what that means for them – is not good enough, frankly.”

As a transitional measure, the UK government has indicated that from 1 January 2021, it will continue to permit people from “low-risk countries” – including the EU –  to come to the UK without a job offer, and seek work for up to a year. This measure is to allow time for businesses reliant on temporary immigrant labour to adapt, It is due for review in 2025.

While the details remains sketchy, the government now proposes three main categories of visa for immigrant workers. These are:

 

  • Exceptional talent or contribution
  • Sector-specific rules-based
  • Skilled worker

 

The skilled worker category is likely to be the most widely used. Applicants for this category will need to score a required number of points across various criteria, and to have a job offer in the UK. Such visas will lead to indefinite leave to remain in the UK.

Amidst the talk of an Australian style points system, has frequently been forgotten that the UK has actually operated a points based system for skilled migrants since 2010. Known as “tier 2 visas”, these are available to highly skilled workers from outside the EEA and Switzerland. The current annual limit is 20,700 per year. Workers must have a UK job offer with a salary over £30,000.

Eligible highly skilled workers are defined as those in professions ranked at level six and above on the Regulated Qualifications Framework (RQF) list. Interestingly, the proposed new visa scheme will be open to workers with medium skill levels, defined as a qualification at level 3 and above, which is A level or equivalent.

Given the prevailing view that the Brexit vote was largely motivated by a desire to restrict immigration, indications that government’s post-Brexit immigration system will be more accommodating than before may seem surprising. For example, the existing cap of 20,700 visas per year is being abandoned, the skill levels required are being lowered and the £30,000 salary requirement is set to be dropped.

Perhaps most controversially, the requirement for employers to first attempt to hire UK workers is also set to be abandoned. Known as the “resident labour market test”, the requirement for employers to first demonstrate an absence of UK residents to fill a role before hiring overseas is being dropped on the basis that it causes delays in recruitment. This change was announced in the government’s immigration white paper of December 2018, as was the abandonment of the cap on visa numbers.

The need for such liberalisation in the skilled worker visa system is explained by the white paper, which says, “The new system will need to be accessible to the large number of businesses, particularly smaller enterprises, that have previously been able to hire migrant labour from the EU”. This is a tacit admission that, far from halting immigration, Brexit may simply mean sourcing immigrants from elsewhere.

The white paper goes on to say that “we will need to make the system as straightforward and light touch as possible, and low cost to employers.” Such assurances are easy to give. However, businesses remain wary of how the new system will operate in practice, and what delays, administrative and other costs will emerge.

While immigrants will have to pay a health charge, employers will have pay an annual immigration skills charge for each worker hired overseas. This is currently set at £1,000 annually per employee (reduced to £364 for small businesses and charities).

The government has committed to reviewing the level of this charge. However, the charge is specifically cited in the white paper as being a protection for UK residents against pay and conditions being driven down by labour from abroad. Therefore its reduction may prove politically controversial.

The “Exceptional talent/contribution” category will be available to those recognised as leaders in a qualifying field, entrepreneurs establishing business in the UK and those investing in the UK. Visas in this category will lead to indefinite leave to remain in the UK. The precise criteria for this category of visas are yet to be formulated.

The “sector-specific rules-based” category will enable the government to designate specific time-limited schemes for sectors where there are labour shortages. Visas issued under these schemes will be time limited and will not enable holders to settle permanently in the UK.

The devil, as ever, will be in the detail. In September 2019, the Home Office tasked the Migration Advisory Committee with considering how points should be awarded in visa applications. The relevant factors will include English language skills, work experience and qualifications. Points might also be awarded for a willingness to work in particular geographical areas or sectors with labour shortages. The Committee’s report is due in January 2020.

The immigration system is only one factor in determining immigration levels. For example, ONS figures show that net migration from the EU plummeted from 219,000 in 2015 to just 48,000 in the year to June 2019 – despite free movement continuing for EU citizens during that time. This has already produced significant problems for employers, especially in sectors employing a high portion of EU nationals, such as hospitality, healthcare, food production, retail and construction. If the new migration regime is poorly implemented without adequate understanding of the need for unskilled or low-skilled workers, there could be a significant negative economic impact.

Important research conducted by CIPD and NIESR  in 2017 found that most businesses hire EU nationals as they “have difficulty attracting UK-born applicants to fill unskilled or semi-skilled jobs”. The research also noted the UK’s flexible labour market as being crucial to economic growth and that “a key element of this flexibility has been freedom of movement of people across the EU”.  Matthew Fell of the CBI business lobby group echoed this view in his recently reported comments that “as important as attracting high-skilled workers is, low-level skills are still very much in demand for business.”

It is testament to the ongoing uncertainty around the UK’s future immigration regime that, while business groups fear a lack of available labour, other groups fear a surplus of it. Given the acute shortages of low skilled workers in some sectors, it would be unsurprising if some UK companies did begin to focus their recruitment efforts overseas.

Groups such as Migration Watch UK, which campaigns for reduced immigration, fear just such an outcome. The group’s policy paper dated 31 December 2019 calls for an “Australian-style cap on numbers” and speaks of “a serious risk that any reduction in the number of lower-skilled migrants coming to the UK from the EU after Brexit will be counterbalanced by an equal if not more marked rise in arrivals from much poorer and much larger non-EU countries.”

In 2018, 17% of the UK’s workforce had been born overseas. Immigrants – many of them highly skilled – play vital roles across the UK economy. Vital sectors such as construction, agriculture and social care depend on low skilled and seasonal workers. The proposed scheme would only allow such workers to work in UK as temporary workers where a shortage is designated in a particular sector. This may not be sufficiently attractive to draw enough workers from overseas – much to the detriment of the economy.

In order to support economic growth, the UK’s new immigration system will have to ensure the availability of a flexible workforce across all skill levels.  In the current political climate, a real risk for businesses post-Brexit is that the level of immigration required to support economic growth could become politically unpalatable.

A 2018 Open University Business Barometer report found that labour shortages were already costing UK businesses £6.3 billion per year. This was spent on temporary workers, recruitment, inflated wages and training. However, the indirect impact of labour shortages in terms of lost economic opportunity is greater still.

EU free movement rules guaranteed UK companies access to a very large pool of labour whenever it was needed. However, in post-Brexit Britain, there is nothing to stop future governments from simply turning off the supply of labour. Whatever the shape of the government’s new points system, even once a UK-EU trade deal is done, uncertainty as to labour supply will likely remain an issue for companies considering UK investment for some time to come.

By Sonia Cheng, immigration and corporate solicitor at Excello Law

Sonia Cheng is an immigration and corporate solicitor at Excello Law

www.excellolaw.co.uk

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