September 9, 2013 8:07 pm

Migration: An open or shut case

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More than one in three Londoners were born outside the UK, and last year it emerged that white ethnic Britons are, for the first time, a minority in the capital. A decade-long surge in the numbers of Indian migrants, among others, has contributed to London’s diversity.

But just as this trend became apparent, ministers began signalling that visitors from the Asian subcontinent and other non-European climes are less welcome than they once were.

The tightening of the UK’s borders – targeting migrants from countries such as India, Pakistan and Sri Lanka – will not only affect the cultural composition of the big cities. Those in the City of London who compete with businesses in other countries to hire talented foreigners argue that politicians’ immigration objectives are undermining the government’s drive for growth.

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At the centre of the controversial change of direction is Theresa May, the home ­secretary. Ms May is battling to meet the prime minister’s pre-election pledge of bringing down annual net immigration to less than 100,000 by 2015 – a significant task given that this figure reached 250,000 in the early years of the coalition.

Efforts to stem the flow of immigrants have included a cap on skilled workers entering the UK from outside the EU, a clampdown on bogus international students and colleges, and new restrictions on foreign students staying on in Britain after they have finished their degree.

But Baroness Valentine, chief executive of the business lobby London First, says policies such as these have “undoubtedly” affected the City’s ability to hire the skilled people it needs. “David Cameron and his colleagues preach a strong ‘open for business’ mantra, but undermine themselves by the barriers they create,” she says.

“To hit its net migration target, the government’s only option is to reduce non-EU immigration ... but these are the high value people needed by business,” she adds. “Restricting these migrants is a genuine threat to the competitiveness of London and the UK.”

While senior HR directors across the Square Mile express similar views, such concerns are not well heeded by politicians. The recent electoral successes of the staunchly anti-immigration UK Independence party have only emphasised that immigration will be a particularly sensitive issue in the next election. Politicians in all three main parties are keen to show they understand voters’ concerns about foreign settlers, and the potential strain they put on jobs and public services.

One exception is London’s mayor, Boris Johnson, who has argued with Downing Street against his own party’s efforts to cut immigration and particularly about the repercussions for his own domain. On a trip to India last year, Mr Johnson said it was “crazy” that the UK should lose foreign students to the US and Australia. He also criticised Home Office visa policies for sending the “wrong signal” to talented foreigners who were considering coming to Britain.

The mayor focused his vitriol on the damage that student visa changes are doing to the UK’s education exports – which eventually also harms businesses if the brightest tech and engineering students gravitate towards universities and companies in other English-speaking countries. While the Office for National Statistics estimates that 246,000 international students arrived in the UK in the year to September 2011, this number fell to 190,000 in 2012.

John Salt, director of the migration research unit at University College London, agrees with Mr Johnson that student policy is the area in which Britain’s visa changes have been most potent.

“OECD [Organisation for Economic Co-operation and Development] members are all competing for high-level skills and have been for some time,” says Prof Salt. “I suspect the UK is as competitive as it ever was for those sectors in which the UK economy is strong. The area where government policy really has had an effect is tier one. The UK has effectively put up the shutters on people coming here from non-EU countries to search for work.”

Ms May’s closure of the old visa route, which gave foreign students two years after their studies to find work in Britain, is the policy Prof Salt says has shifted the UK “particularly out of line with other OECD countries”.

“Most of those passing legislation on this in the past couple of years have been trying to encourage their international graduates to stay and enter the labour market,” he says.

After an intensive period of rule changes in the first two years of government, the Home Office last year announced an end to the constant turmoil and promised companies that they would not have to contend with new restrictions or a further tightening of the cap on skilled immigrants. This proved a welcome reprieve, and many of the business criticisms receded.

But as the election approaches, ministers are again beginning to consider ways to send voters the message that immigrants are being kept out.

Julia Onslow-Cole, head of global immigration at PwC Legal, fears a “promised period of policy stability” for companies may never materialise, as public concern about immigration increases. The next flashpoint is likely to occur when controls on EU migrants from Romania and Bulgaria are dropped at the end of this year.

Ms Onslow-Cole also warns that the introduction of £3,000 visitor bonds to deter immigrants from India, Pakistan, Sri Lanka, Bangladesh, Ghana and Nigeria from overstaying could directly affect City graduate schemes that bring in new recruits for a short time.

The migrant bond move, floated over the summer, has already caused a political furore, with Vince Cable, the Liberal Democrat business secretary, warning his Cabinet colleagues that it would send the message that Britain was “closed for business”. Whether this translates into yet more problem for struggling companies in the capital remains to be seen.

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