May’s offer to EU citizens lacks substance

As soft power ebbs, UK economy will be the loser

The rights of European Union nationals living in the UK has been one of the most controversial issues since Britain voted to exit the bloc in June last year. The key role that concerns over immigration played in the Leave victory stands in sharp contrast to businesses’ and economists’ fears over a weakening labour force.

Around 3m EU nationals live in the UK, comprising 7.3% of total UK employment. Of these around 508,000 are employed in the wholesale and retail trade sector, 382,000 in financial and business services, and around 60,000 are in the National Health Service. From a strictly economic standpoint, Prime Minister Theresa May’s announcement guaranteeing EU citizens’ right to stay in Britain was a step in the right direction.

But this week the European parliament’s Brexit co-ordinator called the proposal a damp squib and accused May of offering EU workers in the UK ‘second-class citizenship’. In an open letter published across Europe, Guy Verhofstadt and eight other leading MEPs wrote, ‘If implemented, it would cast a dark cloud of vagueness and uncertainty over the lives of millions of Europeans.

‘The European parliament will reserve its right to reject any agreement that treats EU citizens, regardless of their nationality, less favourably than at present.’
Examination of May’s offer reveals significant ambiguities. First, to qualify for residency EU nationals who have lived in the UK for more than five years would need to have been physically absent from the UK for no more than 450 days over that period. This means many whose lives involve substantial travel would fail the requirements.

From high-flying businessmen and women, to travel-obsessed millennials, residency may be nothing more than a dream. Additionally, EU nationals who have lived in the UK for more than five years but spent substantial amount of that time abroad, such as in overseas postings, will be excluded even if their total time in the UK exceeds five years.

Second, the ‘citizenship route’ to staying in the UK may not be an option for some EU citizens. Austria, Estonia and the Netherlands do not generally permit dual citizenship for their nationals. This means UK residents who are nationals of these countries would have to give up their EU passports to obtain British ones, which they may not be prepared to do.

There are concerns as to whether the UK Home Office has enough resources to process the applications of EU nationals for residency or citizenship in the proposed time frame. Funding for the Home Office fell by 24.9% between 2010-16 under the prime ministership of David Cameron.

Beyond such practical concerns, the framing of the government’s policy on these rights is important in making EU nationals welcome and willing to stay. May’s short-sighted definition of citizenship contrasts starkly with the values that first attracted many of these EU nationals to the UK and which has contributed to the nation’s soft power and ‘Global Britain’ identity.

Countries elsewhere are looking to fill the void left by Britain’s waning soft power. One of the strongest signals comes from Emmanuel Macron, France’s newly elected liberal president. Many of around 176,000 French citizens in the UK are hopeful his election may lead to the reversal of the structural constraints that first incentivised them to move from France to the UK, and might consider going back.

A survey by Deloitte showed that 47% of highly skilled EU workers based in the UK are considering leaving over the next five years. The UK’s intention to attract businesses and people through tax incentives could prove to be an unsustainable race to the bottom.

Even if EU nationals choose to stay in the UK, this will not sustainably cover the future needs of the UK labour force. The British economy will be the ultimate loser.

Danae Kyriakopoulou is Chief Economist and Head of Research at OMFIF.

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