This isn’t the Brexit we wanted at all

Sean O’Grady, The Independent

I used to think I was the only person foolish enough to think that Brexit might mean more migration rather than less. Seems not. Lord Simon Wolfson, boss of Next and prominent Brexiteer now thinks that “this isn’t the Brexit we voted for”. He thinks it’s damaging the economy. He’s right.

Of course, a huge driver of the Leave vote in 2016 was immigration, and the hostility and misunderstandings that surrounded it. Who can forget Nigel Farage’s fascistic “Breaking Point” poster? The murder of Jo Cox? The lazy, careless, dangerous myths about the EU being responsible for the migrant crisis — which actually affected Greece, Malta and Italy far more than the UK?

Migration was regarded as a drain on our public services and housing and a downward pressure on jobs. What was missed out was the way migration, much of it from Eastern Europe, had boosted GDP and tax revenues, and staffed hospitals, care homes and building sites. Every human is an economic player and if they’re working productively – as young, fit migrants tend to – then they are a net benefit to the economy.

Since Brexit, and the end of free movement of workers (ie not all people) across the EU, we have not seen any economic premium from the shift — quite the opposite in fact. Nor has the end of EU freedom of movement made any difference at all to the flow of people trying to come to the UK, either as refugees or economic migrants. The loss of the EU Dublin III Convention has made retraining failed asylum seekers more difficult. It’s been a disaster.

Brexit has not delivered, in other words. Indeed, the new labour shortages have simply boosted the demand for labour from anywhere. The legal and orderly movement of workers under EU rules from places such as Poland and Romania has been replaced by a less orderly movement of people from Albania and elsewhere going into a less formal working environment. The building sites need workers, and if they happen to be from Tirana rather than Bucharest, well, the site managers won’t mind and nor will the people moving into the flats the Albanians have helped construct once they’re finished.

Brexit has, perversely, made immigration more of a problem for policy makers, and made it far more chaotic. So the UK now enjoys less control of its borders than it did before the new world arrived at midnight on 31 December 2020. Rule Britannia? Doesn’t feel like it.

Ironically, the experience of the last few years has also only served to soften people’s attitude to foreign workers. Before Brexit, they were resented. Now we miss them. The exodus of EU workers and the new restrictive Australian-style points-based system has given us a stagnant economy and inflation. Wages in some sectors, such as lorry driving, had a boost, and there’s now a shortage of labour and record vacancies.

But Brexit has made negligible difference to underlying productivity levels, and high wages accompanied by (and causing) high inflation are not sustainable. Wages aren’t keeping pace with prices. The labour shortages have simply given businesses such as Wolfson’s Next higher costs and lost revenues, and the rest of us higher prices and strikes as unions try to protect living standards and take advantage of the excess demand for labour. You can’t blame them really.

When the recession gets going next year, it will be different. There will be more businesses going bust, more unemployment and more hardship. Public services will suffer from cuts in public spending. Taxes will be higher, as well interest rates, mortgages and business loans. House prices will fall. Real terms wages will too. There will be a squeeze. Despite the alarm over the people arriving across the channel in the small boats, none of this will be their fault — their numbers are too tiny in the context of a working population of about 30 million, in a £2.5 trillion economy. The hotel bills are almost negligible in the grand scheme of things. But it’s a waste of money, and it would be far better if the refugees could be set to work in the legitimate economy, as they wish. If they were working in those hotels rather than staying in them, and allowed to help build the houses and hospital extensions we need, that might be a more economically rational approach.

The more enterprising could start their own businesses, just as waves of migrants did in the past, to build world-class companies. Immigration, in other words, is part of the solution to the UK’s economic problems, not the problem. The hard economic fact is that the UK cannot sustain the size of economy and the living standards it has become accustomed to without a commensurately large and flexible labour force. With fewer workers, the necessary corollary of Brexit, the nation is spending more than it earns – hence inflation and the yawning trade gap (exacerbated by the trade barriers erected by Brexit). Hence also the fiscal and monetary squeeze to get inflation back out of the system. The long recession of 2022 to 2025 will be a direct result of Brexit.

Many other countries face similar pressures, because of Putin’s war, post-pandemic shortages of semiconductors, and the de-globalisation of the world economy. But the UK has the unique disadvantage of having cut itself off from its largest source of flexible labour supply — the EU. Now we see how much we need more people, skilled and unskilled, to help keep everything running. We need to be more open to more migrants from across the planet.

Brexit does mean we no longer need to favour Austrians over Australians, or Swedes over Somalis, say, which is good. We need more of all of them, though, because Britain can’t train “our own” people to do jobs if there aren’t enough of “our own” people in the first place.

What we have now may or may not be “the Brexit people we voted for”, but it certainly needs a rethink because no one voted to be poorer. Did they?