Following June’s referendum and the UK’s decision to leave the European Union (EU), immigration has been front and centre of the UK’s public policy debate. When LCCI took soundings of London business leaders through roundtable discussions and polling over the summer, by far the issue of most concern to London’s businesses was the status of their foreign employees – particularly those from the EU – and how they would be able to access overseas talent once Brexit happens.

It is in this context that LCCI published a new report, Permits, Points and Visas: Securing practical immigration for post-Brexit London, at City Hall, which sets out practical proposals to review, renew and refresh the UK immigration system to keep London, and the wider United Kingdom, globally competitive in the wake of Brexit.

The role of migrant workers in driving London’s economy

The report builds on economic analysis commissioned by LCCI from the Centre of Economics and Business Research (Cebr), which notes that non-UK migrant employees currently constitute 25 per cent of the capital’s workforce (three times more than in the rest of the UK), made a £44 billion GVA contribution and paid £13 billion in direct tax revenues in the past year. London’s businesses are particularly dependent on EU nationals (15.4 per cent of the workforce), rather than non-EU nationals (9.3 per cent of the workforce), which raises concerns around the impact of restricting the current freedom of movement of EU citizens post-Brexit.

Migrants also fill substantial skills gaps in sectors vital to the success of London’s economy; 24 per cent of positions in the financial industry and 36 per cent of construction jobs are currently filled by non-UK nationals. Cebr’s analysis reveals that the departure of EU migrants from London’s workforce would be economically harmful, impacting upon various key industries and putting pressure on public funds.

Looking to the future, Cebr finds that it would be particularly detrimental if new EU migrants would have to enter Britain under the same points based system that currently applies to non-EU nationals: by 2020, London could have lost access to 160,000 migrant workers, and there would be a negative impact on economic output (£7 billion) and direct tax contributions (£2 billion).

LCCI’s new report draws from this economic case and addresses two key questions:

How to practically treat the 771,000 EU nationals currently employed within London firms.
How to realistically plan to process future migrant workers that London will need, in the short to medium term at least.

The challenge of EU citizens

Following the Referendum result, the government released a statement saying that it “fully expected” to protect the legal status of EU nationals working in the UK. However, a statement does not provide legal certainty; International Trade Minister Liam Fox MP has suggested that EU nationals’ uncertain status could be a ‘main card’ in Brexit negotiations. More must be done to provide clarity. LCCI polling over the summer found a quarter of businesses (24%) indicating the position of their EU employees was causing uncertainty.

As such, the first recommendation of LCCI’s new report is that the Mayor of London should champion a single-issue ‘London Work Visa’, granting indefinite leave to remain to reassure current EU national employees and their London employers.

London’s particular skills needs

Cebr’s analysis reveals that, while all regions across the UK have their own particular skills requirements, none is as entwined and reliant upon migrant labour as the economy of the London Region. Around the world many examples can be found of countries that have successfully implemented immigration systems that are responsive to regional skill needs.

Aside from international examples, there are domestic precedents for tailoring immigration controls to specific regions and sectors of the economy. From the inception of the UK’s current immigration system, it was recognised Scotland had specific and differing labour needs to the rest of the UK. As such, Scotland has a separate ‘Shortage Occupation List’, identifying medical and scientific positions for which Scotland employers don’t have to demonstrate no local candidates can be found, before hiring a non-EEA national.

LCCI wants the Government to acknowledge that London also needs a different immigration status through a ‘Targeted Migration Area’ designation, as its labour market needs are arguably unique within the UK. Such a status could be temporary, for a transitional period, to safeguard both the London and UK economy, post-Brexit. In addition, like Scotland, London should have a separate ‘Shortage Occupation List’, acknowledging London’s particular skills needs.

A Capital Work Permit

With Brexit happening as early as 2018, considerable national benefit could also be derived from reviewing and amending provisions of the immigration system now, to provide for London’s distinct migration profile with a new system of regional work permits. This proposal would not be a radical departure from the existing system; responsibility for all UK immigration will remain with the Home Office. However, London City Hall and London business can offer a supportive role in devising future immigration controls for the capital that pay regard to the prevailing national public mood on migration yet offer practical solutions to the capital’s labour and skills requirements.

One proposal is that the Office of Mayor of London and established Business Organisations, including LCCI, could together seek to form a ‘Work Permit Sponsorship Body’ for the London Region. That Body could be licensed by UKVI to act as a broker – with London employers on certificates of sponsorship, and with non-UK applicants for work permits – for the London region, under specified Home Office immigration criteria.

Holders of a Capital Work Permit could then have the permission to work (and live) within London as defined by the capital’s 33 local authority areas. The number of permits granted, and prioritization of applications could be informed by an annual skills audit, which could for example be conducted by the London business organisations. The Capital Work Permit would be time limited and tied to a contract of employment, and should signal that London remains open for business.

Keeping London competitive

London’s position as a national economic hub is well established; the capital contributes heavily to UK economic output and tax collection. However, businesses have signalled very clearly that London’s economy is under threat. There are significant ongoing labour and skills needs over and above any other UK region, and – especially following Brexit – access to sufficient numbers of skilled workers cannot be guaranteed.

What we are asking for does not constitute a radical departure from the existing system, rather a degree of regional variation that will help safeguarding London’s access to talent, and work alongside a major effort to boost our domestic skills base.

LCCI’s proposals to review, renew and refresh the UK Immigration system will help keeping London, and the wider UK economy, globally competitive in the wake of Brexit.

The Mayor has committed to keeping London open. We have started the debate by providing evidence-based proposals on ways to help this happen. Now comes the time to discuss these proposals with officials at City Hall and the Home Office so that London firms can get clarity as soon as possible about how they are going to access much-required talent in the future.