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EU nationals and the British labour force

by Danae Kyriakopoulou in London

Fri 14 Jul 2017

EU nationals and the British labour force Enlarge Chart loading Image

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 on 23 June guaranteeing EU citizens' right to stay in Britain was a step in the right direction. However, closer examination of her proposal reveals debilitating ambiguity.

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.