The call to action from the UK government to the Migration Advisory Committee went out last week urging the MAC to look at, among other things, the sectoral spread of EU migrants with a view to informing the government about "aligning the UK immigration system with a modern industrial strategy". In essence this suggests that the MAC will be asked to think about whether there are any sectors of the economy that are particularly reliant on migrant labour from the EU that might be put on some sort of expanded shortage list in the so-called "third phase" ie after or if the, as yet undefined, "transitional period" that follows Brexit in March 2019 has ended.
Immigrants make up, on average, around 15% of the employed workforce and EU migrants comprise around 5% of the workforce, but these proportions rise significantly for certain agricultural and manufacturing sectors where, as the Table below shows, the immigrant share is close to 50% and EU workers often comprise more than a third of the workforce.
Most of these sectors are small in terms of total number employed but their reliance on immigrant labour is clear. They are also, as the Table shows, typically low wage, high labour turnover sectors.
Even if the UK ends up with a hard Brexit, then most of the existing EU workforce in these sectors - and elsewhere - would still be eligible for British citizenship or leave to remain having the requisite years of residence in the UK. So the workforce is unlikely to disappear overnight.
It is at the hiring margin that employers in these industries may face difficulties after Brexit without some sort of sectoral quotas, seasonal schemes or adjustment period. The annual hiring rate in the UK typically hovers around 15% of the total workforce, though goes up and down depending on the state of the economic cycle. But low wage sectors such as those in the Table tend to have higher turnover. Annual labour turnover in the hotels sector is close to one third of the workforce.
Table: Sectoral Distribution of EU immigrants, 2016
Percentage of sector who are immigrants
Percentage of sector who are EU immigrants
Average hourly Wages
How might Brexit affect hiring? Unless there is an eventual agreement to stay in the single market recruitment from the EU is unlikely to continue at similar volumes after Brexit. Moreover, if, as might be possible at time of writing, the UK economy stalls while many of the EU economies begin to grow more rapidly, then there may be further falls in the net migration figure – for reasons beyond government control. Migrants seeking work will be attracted to the best employment opportunities.
If there are suddenly more opportunities in mainland Europe we would expect more migrants to choose Germany, France or Spain rather than the UK. The 15% fall in sterling relative to the Euro over the last year also makes UK wages 15% less attractive relative to a job in the Eurozone to prospective migrants. This means that even in the absence of Brexit, a seemingly never-ending supply of European labour – faced with increasing better alternatives elsewhere - must be in doubt.
Non-EU work visas to the UK are currently restricted to “graduate-level” jobs. Most of the sectors in the Table (excepting translation services) are non-graduate jobs – although there are some graduates working in these sectors. Any quotas on work visas on EU nationals after Brexit are also likely to favour graduate sector jobs because the net fiscal benefit is higher. High paid workers tend to put in more than they take out in benefits and public services. So certain firms and sectors would also have to look around for different sources of labour, raise wages or change their methods of working (though any firm that relies on a never ending supply of EU workers in an environment of free movement has an unstable business model).
Business has long argued for the freedom to hire the best people for the job – though no country in the world allows business unfettered access to migrant labour or allows them complete freedom to set wages or other employment conditions. In the UK, at the less skilled end of the labour market, the national minimum wage, the soon to be revamped Labour Inspectorate ensure that wages and working conditions are regulated. The issue for a minority of employers going forward is how to adjust to a labour market in which one particular source of less skilled workers is likely to be restricted.