May's plan to slash immigration after Brexit could cause 'huge' economic damage

Theresa MayWPA Pool / PoolPrime Minister Theresa May

LONDON — Prime Minister Theresa May’s pledge to cut annual immigration below 100,000 could cause “huge” economic damage to the UK, according to a new report by the Centre for Economics and Business Research.

The analysis, reported by the Financial Times, found that cutting net migration below 100,000 a year — as pledged in the Conservative manifesto — could reduce the potential size of the UK economy between 1.5% and 3% by 2025.

It found that, by 2030, that hit could increase to between 4.1% and 5.7%.

Gross domestic product per person would be between 1.9% and 2.7% lower than otherwise by 2030, according to the report’s estimates.

Speaking to the FT, Douglas McWilliams, founder of Cebr and the report’s author, said: “If the UK cuts off migration without making adjustments to boost productivity, especially productivity in the public sector, the scale of the economic damage could be huge.”

He said that immigration eases labour bottlenecks, boosts diversity, and has a positive effect on productivity and growth, the latter of which boosts wage growth.

Net migration to the UK was around 273,000 for the year ending September 2016, according to the ONS.

Other think-tanks and academics have warned that cutting immigration dramatically could damage growth. The Office for Budget Responsibility found last year that a reduction in net migration by a relatively modest 80,000 a year would force the government to borrow an extra £6 billion annually. That is because migrants contribute more overall to public finances than they receive.

Portes, professor of economics and public policy at King’s College London, told Business Insider: “In a market economy, the idea of targeting the net flow of people — as opposed to having a system which says some people can come and some people can’t — is central planning at its worst.”

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