Life in the UK

Brexit: 22 months on

How The UK Immigration approach needs to evolve to adapt to the changing realities in the post Brexit scenario.

23rd June 2016 will go down as a fateful day in British history. This was the day that the majority of British citizens decided to end a 43 year old partnership with the European Union (previously called the European Communities until 1993) through a referendum.

The split from EU is likely to affect the rights of European nationals in the UK and [reciprocally on UK citizens residing in EU countries], including

  • The right of free movement
  • Right of cooperation on asylum,
  • recognition of EU citizens’ qualifications,
  • Hampering of trade for the UK leading to uncertainty in the job market
  • A temporary hindrance in FDI, which should return to the usual high levels after the initial Brexit volatility ends.
  • Drop in value of a currency
  • Stock market fluctuations

It all started when some analysts, a think-tank launched in the UK in the year 2001, singled out immigration as a factor leading to drop in employment and other measures of standard of living for British citizens: Click here for their reports. Anti-immigration sentiments had been steadily on the rise not only in Britain, but several other countries including Germany, Austria, and the United States.

About 3.6 million citizens of other EU countries resided in Britain in 2016, making up about 6 percent of the nation’s population, according to statistics from a UK based independent fact-checking organization:

Immigration continues to remain a daunting policy concern as the UK tries to envision a future outside of the EU. Hopes that Britain and the EU can reach a deal addressing the nation’s migrant population could be in vain, according to our research at The SmartMove2UK.

However, like any nation of the modern world, the UK needs trade partners. It’s quite understandable. According to a study by a leading news agency, Britain faces the danger of losing approximately 10,000 jobs to EU nations if it fails to be a part of the EU’s single market economic union. A large number of firms in London have already started their search for other locations to move their operations post-Brexit. In previous years, major banks like Goldman Sachs and Morgan Stanley had indicated their plans to move out of Britain. In another possible sign of things to come, Lloyd’s of London, one of oldest insurance providers in the UK (the world), is expected to open its office in Brussels.

This explains Britain’s keenness to make the most of their relationships with the Commonwealth Nations. As of today, the EU is the UK’s largest trading partner. According to official government statistics, UK exports to the EU were $331 billion in 2016, 43% of all UK exports worldwide. UK imports from the EU were $447 billion, which is 54 percent of all UK imports.

On the other hand, trade between Commonwealth members is expected to go up to $1 trillion by the year 2020. With the EU unlikely to remain its biggest trading partner, Britain is eyeing this market post-Brexit.

Cutting off from economic blocs can be considered a step backward in terms of globalization and humanity’s progress towards a united earth. There might be a respite for the UK post Brexit by turning to old support systems like the Commonwealth, but this should not distract from the fact that such decisions (a referendum to leave the European Union) do not usually lead to the outcomes that people hope for. A more lenient policy towards immigration and the granting of UK Visas is something that the British government should continue to consider in their long term agenda.

Brexit may be likely to prove to be a great example of the old Aristotelean idea that giving every citizen of a vote is a major downside of a democratic society. According to the ancient Greeks, a vote is a power that comes with responsibility, and hence must be granted as a privilege to the percentage of the society that is well versed with matters of the world. Should Aristotle have been around today, he would probably have been astounded by the Brexit referendum; the fact that common citizens have been given the power to make such an important decision for an entire nation, possibly affecting the lives of millions of people both in the UK and outside.

There’s more than a little suspicion in the UK that the rest of the world is enjoying the mess the Brits are in, unwillingly forced to accept the will of the common people and struggling to get a grip on the complexities of separating trade, legal systems, financial and political commitments built up over 44 years.

That being said, it’s now time to look at some of the consequences of the referendum over the last year and a half.

There certainly has been a decline in EU net migration. According to a 2017 year ending report by the Independent, net migration fell by more than 106,000 since the time of the Brexit vote. This may be linked to the strength of the currency. The referendum result led to a wave of concern in global financial markets about the UK economy, which immediately resulted in a decline in the value of the pound against major currencies; reducing the relative value of wages for migrant workers in the UK.

But employment rates are still constant, and even slightly on the rise. This indicates that there definitely seems to be a light at the end of the tunnel for individuals looking to move to the UK on work visas or the UK Entrepreneur Visa.

Employment level by country of birth

If we look at some other business aspects of the consequences of Brexit, we find that the Pound value will continue to remain low relative the Dollar. This is illustrated by the trends illustrated in the graph below:

Evaluation nation the pound has remained low against the US dollar

The low value of the British Pound Sterling will logically lead to a continued surge in inflation rates of the UK. You will clearly require a higher amount of low-value currency to meet consumption needs. This trend in rising prices for consumer goods can be credited to the high inflation as illustrated in the graph presented below of Inflation rates in the UK post referendum:

Inflation has surged since the referendum

According to basic economics, the higher the inflation rates in a nation, the lower will be the wage rates. The drop in wage rates should be a major consideration for the British Government while planning future policies. It would be useful for the common British citizen to also have a look at this data in order to educate people about the fact that a higher employment rate will not necessarily lead to a higher amount of money in your pockets. The post-referendum wage rates have been illustrated in the graph below:

Real wages falling for first time since 2014

Not all is grim however for the UK economy. Contrary to predictions made by Bank of England regarding the UK’s GDP growth, the GDP growth rate has actually been on the rise since the referendum, touching the 2% growth rate mark on two occasions. Have a look at the GDP growth rate of the UK in the years 2016-2017 presented below:

Growth surprise GDP expanded more than expected

Impact of Brexit on India

India, being a major player in the world markets, has now become a viable option for a strong trade partner for the UK. The recent meet between Indian Prime Minister Narendra Modi and his British counterpart Theresa May is a testament to the optimism regarding India-UK relations in the near future. The joint-statement given after the meeting indicate that the two nations are striving to reinforce their strategic partnership, based on shared values, common law, and institutions.

Some of the excerpts of the joint-statement of the Modi-May meeting include:

“We are committed members of the Commonwealth. We share a global outlook and commitment to a rules-based international system that strongly opposes unilateral actions that seek to undermine that system through force or coercion. We share the Living Bridge of countless personal and professional ties between our nations.”

The UK and India will work closely together and with other Commonwealth member-states, the Commonwealth Secretariat and other partner organizations to address shared and global challenges.

The new direction that the India-UK relations are taking will see the deployment of complementary technological strengths between the two countries to create high value jobs, enhance productivity, promote trade and investment and tackle shared challenges.

The leaders have agreed to forge a dynamic new India-UK Trade Partnership, to facilitate investment in both directions and intensify collaboration on shared or complementary strengths, including bilateral immigration.

All the research, studies and analyses can only take us this far. Eventually, it all comes down to how the UK government chooses to move forward. Based on the fluctuations in the business, economic and political environment since the referendum in 2016, it seems like a safe bet to say that the UK should be working on coming up with effective and robust policies for the future of migration into the country.

Societies across time and space have suffered every time there has been an opposition to migrants. On the other hand, some of the greatest civilizations in human history, like the Romans and the 20th Century USA, have had the reputation of having a large contribution from ‘outsiders’.

The UK, like great civilizations everywhere, will be evolving towards a healthier migration diplomacy. But there is a difference between knowing the path and following it. And following the path towards a stronger nation will require rigorously reworking the current immigration policies.

As of today, there is a well-founded optimism for the future of the UK economy, despite the current volatility. No big change can happen without an initial storm. But with constant efforts in diplomacy and migratory policies, equilibrium will be achieved.

The storm will be followed by another long spell of British prosperity.

The SmartMove2UK

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By Falguni Parekh

Falguni Y Parekh, Solicitor and Principal Director at The Smartmove2UK, Immigration Law firm with offices in Mumbai, New Delhi, Bangalore, and Chandigarh. The Smartmove2UK provides advice and assistance for UK nationality and immigration applications.