Resolution Foundation says cut in immigration might boost pay in some low-paid sectors, but would not compensate for slowdown in growth

Damage to the economy caused by Brexit will more than offset the modest wage gains for British-born workers in low-paid jobs caused by cutting net migration to the tens of thousands a year, a study has found.

A report by the Resolution Foundation thinktank said there would be a small pay increase to native-born employees in sectors such as security and cleaning if there was a big cut in the number of workers arriving in Britain from overseas.

But it estimated that these benefits would fail to compensate for the reduction in real incomes caused in the short term by the higher inflation triggered by a falling pound, and in the long term by a slowdown in the economy’s growth rate.

The Resolution Foundation also warned that achieving the government’s target of cutting annual net migration from more than 300,000 to the tens of thousands would present serious challenges for companies that rely on low-paid migrant workers – and could force some of them out of business.

Immigration was a significant factor in the referendum campaign, with a sizeable number of those who voted to leave the EU citing it as reason for supporting Brexit. Early last month, Theresa May, then home secretary, said the government had received a clear message from the electorate and needed to control the numbers of people coming into the UK from the EU.

But the Resolution Foundation study found that the wages of British workers in sectors most affected by migration would rise by just 0.2-0.6% by 2018, even if the government was able to hit its net migration target immediately. It noted that since the referendum the Bank of England had cut its forecast for average earnings over the same period by two percentage points.

Facebook Twitter Pinterest A vineyard in Sussex, one of many food and drink manufacturers that rely heavily on migrant workers. Photograph: Jason Alden/Rex Features

While concluding that reducing net migration would have little impact on the earnings and employment prospects of British workers overall, the thinktank said a dramatic reduction in the numbers coming to Britain to work could cause “severe damage” to industries such as food and clothing manufacturing and domestic personnel, where more than 30% of the workforce are migrants.



“Going forward, recruitment is likely to be a challenge for these sectors. Given the fact that migrants in these sectors earn a lot less than average native wages, it is unlikely that these sectors will be able to substitute migrant for native labour without rethinking their business models,” it added.

The Resolution Foundation called on the government to place these sectors at the heart of a new industrial strategy. In particular, the thinktank suggested a short-term guarantee for the right of migrant workers in these sectors to prevent a “short, sharp drop in the number of workers available for work, which could threaten the viability of some businesses”.

Beyond that it called for investment in skills and labour-saving technology to support more high-paid jobs or replace low-paid roles that could no longer be filled.

And it suggested that a reformed migration system after Brexit was likely to be more dependent on temporary workers, which it said would require an overhaul of “the light-touch labour market enforcement regime” in the UK.

The study pointed out that there were just 350 frontline staff at three government agencies enforcing the minimum wage, employment standards and tackling gangmasters – equivalent to one officer for every 20,000 working-age migrants.

The Resolution Foundation called for a new single labour enforcement unit that would work to prevent new forms of illegal migration, including overstaying workers, and the undercutting of pay and conditions.



The thinktank’s director, Torsten Bell, said the study showed the impact of migration was complicated and needed to be responded to. But he pointed out that other factors as a result of Brexit, including the potential economic downturn, would have a much bigger impact on the wages of British people.



“To reduce net migration to the tens of thousands would mean cutting the numbers coming from within the EU by much more than half while simultaneously significantly reducing migration from the rest of the world,” said Bell.



“To achieve that you’d need a very aggressive points-based system and to accept a lot less temporary labour. That would mean losing single market membership, but also accepting the same restrictions on British people working elsewhere.”

But he said the research also showed that arguments on both sides of the hotly disputed immigration debate were exaggerated. “People who say that everybody benefits from migration automatically are wrong, but so are those who suggest ending migration will solve all our problems.”

Overall, the study found that widespread migration into the UK in recent years has had no effect on the wages of British workers, but has caused a “slight drag on wages” in some sectors.