The population could shrink by 2% after the coronavirus pandemic if “missing” migrant workers do not return to the UK or are not replaced, a watchdog has warned.
This poses a “risk to potential output in the longer term”, the Office for Budget Responsibility (OBR) – which analyses the country’s economic forecast – said in its latest report as it cited research which suggested up to 1.3 million people may have left the UK during the pandemic.
According to the document, analysis of labour market data suggests the population may be “substantially smaller” than indicated in official statistics because of the “significant numbers of foreign-born nationals returning home during the pandemic and lower levels of immigration than pre-pandemic projections assumed”.
The report added: “Unless most of these ‘missing workers’ do indeed return or are replaced by other migrants after the pandemic, the scarring impact from net outward migration may be rather larger than we previously assumed.
“Indeed, on a worst-case basis the population could be as much as 2% smaller.”
While some EU migrants may return, post-Brexit changes to immigration rules are likely to make it “harder for new migrants to move to the UK”, the report warned, adding that some may no longer meet the Government’s criteria and others may be “discouraged by tighter immigration rules”.
Key requirements will include being able to speak English to a certain level, having a job offer from an approved employer and meeting a minimum salary threshold.
The report said: “Although the extent of net emigration is still highly uncertain, the risk to the size of the population appears to be firmly to the downside.
“Such an outcome could reduce the potential output of the economy via a lower labour supply, leading to greater post-pandemic scarring than the 3% included in our central forecast.
“This is a risk to the outlook for the public finances as a smaller economy would reduce tax receipts, amplified by the fact that migrants are more likely to be of working age and net contributors to the public finances. It would, however, reduce demands on public services.”
