Drop the Target: May's 'tens of thousands' immigration cap would cut labour supply and deepen existing shortages, report says

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Theresa May’s post-Brexit plan to slash immigration will have a devastating “double whammy” impact on the British economy, according to the most detailed study of EU nationals to date.

The new report seen by The Independent reveals how the Prime Minister’s stubborn refusal to dump her “tens of thousands” cap on net migration would not only cut off a vital supply of labour, but deepen existing shortages in key sectors.

The impartial consultancy behind the study is urging the Government to base future immigration policy on “economic need” instead of an arbitrary numerical target like that maintained by Ms May.

It comes amid deep cabinet divisions over how to approach immigration during Brexit talks, with the Government’s position still in question despite the start of negotiations on Monday.

Chancellor Philip Hammond is using his new clout to push the Prime Minister to adopt an economically minded “jobs first” approach, but Brexiteer ministers are demanding she maintain her tough stance on immigration.

The Independent launched its Drop the Target campaign with Open Britain, earlier this year in a bid to push the Government to dump the discredited “tens of thousands” cap.

But the research from independent consultancy RepGraph brings new urgency to the matter, with Brexit Secretary David Davis about to start negotiating on the issue with the European Union.

RepGraph concluded that a “blanket approach to reducing migration” focusing on low-skilled workers could have “a doubly negative impact” by both withdrawing a critical labour supply and compounding existing skills shortages.

Laying waste to arguments for a system that only allows highly qualified individuals in, the report instead underlines the desperate need the UK economy has for low-skilled employees.

“Low-skilled migrants are filling gaps in the workforce where the need is greatest,” the report concludes.

It sets out that industries employing the largest number and proportion of low-skilled EU workers are those already suffering the most acute labour shortages, while there are far fewer EU citizens taking high-skilled jobs in sectors that tend to have low labour shortages.

In particular, the study concluded that the Government’s target to cut annual net migration to under 100,000 would disproportionately hit sectors with existing shortages – including accommodation and food, administration and support, wholesale, retail and vehicle repair, manufacturing and construction.

RepGraph, which analysed Office for National Statistics data, found that the 2.1 million EU citizens make up a small proportion of the UK workforce, some 7 per cent, but only a fifth are in highly skilled jobs – with most employed in London and the South-east, and fewest in the North-east and Wales.

Of the 10 sectors with the most acute shortages, seven have above average EU migrant employment – at around 16 per cent on average, compared with 7 per cent in the economy as a whole.

The report said: “This demonstrates the range of skills EU nationals bring to the UK economy.

“EU immigrants are most often employed in the lowest skills jobs, facing the greatest labour shortages.”

EU workers are almost four times as likely to be found in a low-skilled job in industry with acute shortages than in a high-skilled post without such problems.

In wholesale, retail and vehicle repair, the proportion of EU workers in the lowest skilled posts is five times higher than in the high-skilled positions. In transport and storage, it is more than eight times higher and in manufacturing almost seven times greater.

Education, health and social work, science and communications have the most EU nationals employed at the highest skill levels.

The study concluded: “Any decrease in EU immigrants is therefore more likely to affect the ability to employ people in jobs requiring the lowest level of skill and less likely to affect the jobs requiring the highest level of skill, and could exacerbate skills shortages where they are already most acutely felt.”

The report, commissioned by the Business With Europe group, was seized on by the campaigning organisation Open Britain, which said it showed hitting the Government’s arbitrary target would have a crippling impact on the economy.

Former shadow Business Secretary Chuka Umunna, a leading supporter of Open Britain, said: “It’s a depressing fact that this needs saying in 21st century Britain, but this report proves that EU nationals make an enormous contribution to our economy and our country.

“EU workers are plugging vital gaps in the sectors of our economy that need them the most.”

He added: “Theresa May’s ill-advised recommitment to reducing net migration to the tens of thousands will exacerbate already existing skills shortages and British businesses and our whole economy will pay the price.”

During the election, Ms May and her ministers have dodged media questions about their policy on EU migration after Brexit. While pledging to control immigration, they have promised a flexible approach after fierce lobbying by business leaders, who are deeply worried about skill shortages.

David Davis, the Brexit Secretary, is likely to have been given similar findings to the RepGraph study by his civil servants. He has signalled that immigration levels would rise “from time to time” depending on economic need.

Several cabinet ministers have acknowledged the vital role played by migrants in the areas for which they have responsibility, begging the question of how the “tens of thousands” target would be met. Latest figures show it was 248,000 in 2016, a drop of 84,000 on the previous year.

The Tory manifesto still stuck to the tens of thousands target promising to double to £2,000 a year, the levy on companies employing migrant workers, with the revenue spent on higher level skills training for UK workers.

But after Ms May failed to win a majority the dynamic of her Government has fundamentally changed – with her previous immigration-focussed approach to Brexit effectively rejected by voters.

As the price of his support for her premiership, it has been reported that Mr Hammond demanded she change tack and adopt an approach that puts preserving growth first. He is also supported by the newly empower Scottish Tory leader Ruth Davidson.

But the issue is set to be a Tory battleground, with reports that Brexit-backing ministers including International Trade Secretary Liam Fox will quit if Ms May shifts her approach.