The UK's immigration restrictions are expected to cost businesses over £40 billion

The UK government’s latest measures to restrict access to international students and foreign workers are expected to cost businesses over £40 billion, according to official estimates.

These findings, as the Financial Times reports, come as the Labor government of Prime Minister Sir Keir Starmer pushes ahead with immigration reduction policies originally introduced by the previous Conservative government.

The Times reports that Home Office impact assessments indicate a significant financial impact on the UK economy.

The assessments show that changes to visa sponsorship rules for skilled workers, implemented in April, will cost businesses £37.4 billion over the next decade.

These costs are primarily due to expected salary increases that employers must offer to attract talent.

Economic impact of new rules

The Times reports that the assessments show modest budget savings from reduced spending on public services; However, this does not offset the forecast economic losses.

This means that while the government expects to make savings due to reduced spending on public services as a result of immigration restrictions, these savings will not be enough to offset the larger economic losses predicted by the measures.

In other words, the financial benefits of reduced spending on public services do not offset the overall negative impact of immigration restrictions on the economy.

The total net economic impact is reportedly estimated at £26.5 billion, indicating significant costs to society over the same period.

In addition, a new restriction banning international students from bringing family members is forecast to result in a loss of almost £5 billion in tuition fees for the higher education sector and around £15 billion in tax losses for students and their dependents.

Despite the negative impacts, impact assessments suggest that adjustments to subsidized work routes could bring modest benefits.

The report points out that the ban on nursing relatives, which has been a major contributor to rising net immigration since 2022, could lead to savings. The government expects that foreign workers would continue to fill vacancies without placing additional burdens on family members needing education and health services.

Political stance and future policy

The latest regulatory changes are part of a broader strategy launched by the Conservative government in response to record high net migration of 764,000 in 2022, according to the Times.

Since taking office in July, Starmer has stuck with these reforms while emphasizing a desire to further reduce immigration levels, particularly for highly skilled workers.

The Financial Times revealed that in a recent address to business leaders, Starmer assured that he would not abruptly scrap visa options, but expressed frustration with employers relying on hiring overseas rather than investing in local training programs.

Reactions from business groups

Business associations have raised concerns about tightening visa requirements. They argue the changes could worsen financial difficulties in the higher education sector and exacerbate recruitment challenges in key industries.

The Home Office acknowledges that its estimates are subject to significant uncertainty, depending on how businesses and individuals adapt to the new rules.

It found the overall impact on public finances would be “small” over a decade, with alternative scenarios suggesting the possible outcomes could vary significantly.

Trends in skilled worker migration

Recent Home Office data suggests that the influx of skilled workers has remained stable since the regulatory changes came into effect, but the number of nursing staff has fallen significantly.

The Times reports that the government has reiterated its commitment to reducing net migration and stressed that immigration should not be a substitute for addressing the UK’s skills shortage.

Therefore, going forward, the Home Office plans to link immigration policy with skills development efforts to reduce reliance on international recruitment.

The Financial Times notes that as the Labor government pushes ahead with its immigration agenda, the economic impact remains a major concern for companies that rely on international talent.

The dialogue around this policy continues, with various interest groups advocating for a balance between immigration controls and economic growth.