LONDON – Brexit is already having an impact on Britain’s labour market, with the number of people from the European Union working in the country falling by a record amount.
The Office for National Statistics said Tuesday the number of EU nationals working in Britain fell by 132,000 in the three months to September compared with the year before, to 2.25 million. That’s the largest annual fall since comparable records began in 1997.
Some decline would be expected given economic improvements elsewhere in the EU over the past couple of years. However, it appears that the vote to leave the EU in June 2016 has had an impact as well. Not only did it lead to a sharp fall in the pound, which made Britain a relatively less attractive proposition, it also created more uncertainty about the future status of EU workers in Britain.
“The sharp fall in EU migrant workers over the last year shows that Britain’s labour market is already changing ahead of Brexit,” said Stephen Clarke, senior economic analyst at the Resolution Foundation.
EU nationals in Britain have lived in uncertainty about their future work rights since the Brexit vote, which was largely driven by concerns over immigration. One of the main tenets of EU membership is the freedom for citizens to move and work anywhere within the 28-country bloc.
Discussions over Britain’s exit in March 2019 are still going on and there are doubts as to whether the British Parliament will back any deal Prime Minister Theresa May strikes. Though the government has sought to assuage concerns of EU citizens in Britain about their future, talk of Britain crashing out of the bloc without a deal on future relations is adding to uncertainty.
The departure of more EU nationals comes at a time when the U.K. labour market is doing well. The number of people in work was up by 350,000 on the year to 32.41 million, with British nationals working up by 448,000 to 29 million. Overall, the unemployment rate is super-low at 4.1 per cent despite a 0.1 percentage point rise over the most recent period.
Wages are rising, too, with employers seemingly having to respond to scarce labour by giving workers more money. Average earnings over the three months to September, excluding bonuses, were 3.2 per cent higher than the corresponding period a year earlier. That is the highest rate since a decade ago, before the global financial crisis pushed the economy into recession.
How the labour market performs over the coming few months will likely depend on what happens with Brexit. The government has insisted that EU citizens’ freedom of movement will end after a transition period currently expected to last for 21 months past March. What rights they will get after that is still unclear.
“Firms who employ a large share of migrant workers must think now about adjusting to a lower migration environment – in terms of the workers they employ, what they produce and how they operate,” said the Resolution Foundation’s Clarke.
Most forecasters think that a no-deal Brexit, which would see tariffs slapped on British exports to the EU, border checks reinstalled, and restrictions on travellers and workers, would damage the British economy.
The Standard & Poor’s ratings agency last month said a no-deal Brexit could push the British economy into recession and cause unemployment to spike to 7.4 per cent by 2021.