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Britain’s labour market needs to shift away from low-skilled jobs filled largely by eastern European migrants and instead seek highly skilled migrants from around the world to work in high-productivity sectors, according to a long awaited report on the effects of EU migration.

Alan Manning, chairman of the Migration Advisory Committee, said that several sectors of the UK economy had enjoyed a “tailwind” since 2004, thanks to the availability of cheap, highly qualified labour from new European Union member states. But he added that “they’re not necessarily the parts of the UK economy that we want to be growing”.

Behind the recommendations is a recognition that without big changes, the UK labour market will tighten substantially when the UK leaves the EU following the end of a proposed transition in 2021. The committee believes that shifting immigration in favour of highly skilled labour will boost productivity, increase wages and bolster the public finances.

The report’s recommendations are closely aligned with plans outlined in briefings that Home Office officials have given in recent weeks on future immigration plans, giving them a strong chance of becoming government policy.

The number of European Economic Area (the EU plus Norway, Iceland and Liechtenstein) citizens working in the UK has quadrupled from just over 500,000 to more than 2m since a slew of eastern European states began joining the EU in 2004.

Most non-EEA citizens are able to work in the UK only if they qualify for a Tier 2 visa for highly skilled migrants. This is issued to only 20,700 workers annually— and is restricted to graduate-level jobs with salaries of £30,000 per year.

The MAC report argued that the lowest-paid migrants, most of which are from the EEA, are a drain on the public finances and exert downward pressure on wages, while higher-skilled migrants produced clearer net benefits. It called for an end to the preferential rights of EEA citizens, restrictions to low-skill migration and an easing of the bureaucracy and regulations for higher paid migrants from overseas.

“High-skilled workers bring clear benefits to the UK economy and should be actively encouraged,” Mr Manning said.

He acknowledged that many of the sectors that had enjoyed rapid growth over the past 10 to 15 years might grow more slowly or even contract in future under the proposed changes but added that this would be outweighed by the uptick in productivity and wages.

The report recommended easing the requirements for bringing in workers from outside the EEA by removing a cap on the number of Tier 2 visas issued after Brexit and opening them to medium-skilled workers.

However, it said a minimum salary level should be maintained for the visas and an “immigration skills charge” — currently £1,000 — should continue to ensure preference was given to workers already in the UK.

“We think that if you have appropriate salary thresholds, that’s the way of making sure that this isn’t an easy, cheap option,” Professor Manning said.

The report rejected that access to cheap European labour was vital to the survival of sectors such as social care, although it recommended a sector-specific migrant labour plan for agriculture, where ministers earlier this month announced the trial of a new seasonal scheme. It also suggested that a supply of workers for other sectors could come from people already in the UK or via a “youth mobility” scheme providing young, short-term staff.

But business lobby groups questioned whether the benefits of the MAC approach would outweigh the risks of the potential disruption.

Ben Willmott, head of policy for the CIPD, which represents Human Resources professionals, said the MAC proposals would create “significant challenges” for employers who were already struggling to find the people and skills they needed.

“The government should be cautious about making significant policy changes that limit low and medium-skilled labour when the very modest potential gains are more than likely going to be offset by making it harder for employers to recruit the labour they need,” he said.

Prof Manning recommended that any sector facing labour shortages caused by the proposed measures — such as in the food-processing industry — find new ways of maintaining workers and attracting labour.

“It could think about using its existing workers more productively,” he said. “It could think about raising the wages, improving the terms and conditions so that it becomes more attractive.”

However, many in business groups pointed out that the MAC acknowledged that the effects of EEA migration were relatively minor and that the inflow of migrants to the UK was slowing.

Julia Onslow-Cole, head of global migration for PwC, the consultancy, contrasted this with the potential scale of the damage that could result if the sweeping changes recommended by the report were introduced too abruptly.

“Businesses need time to prepare for and adapt to changing the world of work,” she said. “In the interim, it’s important that employers retain access to low-skilled labour including migrant workers.”

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