In light of our recent reports on the MAC Report, this week we bring you Panos Panayiotopoulos’ analysis on what might happen to highly-skilled labour choosing to stay or migrate to the UK. Are their options limited? What is the future like post-Brexit?

Read Part 1 of our article on the MAC Report here
Read Part 2 of our article on the MAC Report here

Higher-skilled workers

On the other side of the spectrum, we have the higher-skilled workers. This is the target group for Great Britain, the people they want to attract and incentivise to stay in the country. As we discussed earlier, the salary threshold will be set at £30000, meaning that different areas of the UK will be affected in a different way. To back this example, we can take a look at Figure 1 which shows the average salary earnings in London over the past 15 years, clocking in at over £39 000 per year, easily surpassing the threshold. Even by comparison to the other “high earning” towns and areas of the UK, London is by far the highest. For example, the average weekly wage in London comes up to £727, whereas other South Eastern areas only amount to barely over £600[1]. Areas such as Edinburgh and Aberdeen, which are considered to be high-end manufacturing and oil industries, barely make it to £600 per week.

If we extrapolate these values to an annual wage, London is once again way over the threshold, whereas these other areas barely make it over it (£31200). It is also important to remember that this is a calculated average, which means that there will be a significant amount of people which will be under the threshold, in areas other than London. The distribution of wages over the whole country is skewed to the left, meaning that London’s average earnings could even form an outlier, as seen in Figure 2.

Now that we have seen what will probably happen in the UK, we should look into the potential impacts for European citizens. Taking into account Figure 3, as we have done earlier, we have to draw conclusions as to what this might mean for them. There are two probable scenarios for high-skilled European citizens:

1. To move to another EU state with a strong financial/business presence.
2. Absolutely no change at all with EU migrants in London.

  1. It has been long speculated that the British exodus would spell the demise of its status as Europe’s financial hub and manufacturing hub, which in turn caused other EU regions to emerge as possible alternatives. A prominent example of this would be Luxembourg. Despite its size, it is ranked #14 out of 92 global financial centres[2], a bright beacon for the EU and its financial sector. After the 2016 Brexit vote, as seen in Figure 4, both the domestic and Euro area unemployment rates are declining, signifying a possible shift away from London and towards Luxembourg. Figure 5 verifies, in part, the previous claim since it shows a 45% decline in EU nationals moving to the UK after the infamous Brexit vote. Higher-skilled workers therefore could find a home in areas such as Luxembourg, Frankfurt or even Paris and Amsterdam. It should be made clear, however, that this will not be a sudden emergence of a previously unheard of financial or business hub within the EU. Established information technology companies and investment firms are in a prime position to offer incentives for an influx of high-skilled workers.
  1. London is, and should be treated as, a separate entity to the rest of the UK. Several established IT and investment firms have expressed their trust in the city and how they are willing to further invest into maintaining it as a strong global business hub. London and Partners found in a study that the UK’s tech sector attracted £2.99 billion [3] in venture capital, an amount which is more than France, Sweden and Ireland combined. It is clear therefore that London could become a completely separate fin-tech hub, which in turn means that large corporations are looking to stay invested in it and SMEs scrambling to get a foot in the door. This in turn will of course keep the demand for jobs high which will once again attract EU nationals. As mentioned earlier, it is very much likely for high-skilled individuals to be earning over £30 000 as a salary therefore satisfying the criterion for a visa. London will therefore remain a very popular destination for high-skilled workers, but not other areas.

Having more transferrable skills as well as experience in the field means that these workers, as proved by the MAC report, will be more valuable than detrimental to a country’s economy. “Smaller” business hubs, such as Amsterdam, should start thinking of how to incentivise high-skilled workers in moving and settling in their region.

London, and by extension the UK, has two very distinct advantages over other EU regions. The first one is the language. Whether this is the case in Europe or not, 20% of the world population speaks and deals in English whereas by comparison, an estimate of 4.8% speak and deal in French[4]. Furthermore, the UK has a very strong established education system which naturally attracts and breeds highly-educated people which it then converts to highly skilled workers within the country they have been taught.

There are, however, many unanswered questions which inhibit us from coming up with a definite conclusion:

What about the families of EU workers which may not be qualify for visas – will they be able to stay in the UK?
Will the net decrease in other areas of the UK balance out the potential increase in London?
Will there be enough demand in London to satisfy all potential EU workers?

The answer to all these questions is probably no, but we might still get to see a slight net increase in EU workers in London due to the increase in potential investments, as it is shaping up to be a separate entity from the EU. By extension though, this will mean that the UK will not possibly be able to accommodate the previous amount of high-skilled workers, thus creating a diffusion of said workers to other EU countries.

The most pertinent question which remains however is: where will this surplus of workers end up?

The race is on! Which will be the next “EU London”?

 

Figure 1[5]

Figure 2[6]

 

Figure 3[7]

 

Figure 4[8]

 

Figure 5[9]

Featured Image Credits: Petros Petrikkos

References

[1] https://www.bbc.com/news/business-43729508

[2] http://www.luxembourgforfinance.com/en/news/luxembourg-top-3-eu-financial-centres-climbs-global-rank

[3] https://www.londonandpartners.com/media-centre/press-releases/2017/20180105-2017-record-year-for-london-and-uk-tech-investment

[4] babbel.com

[5] https://www.verdict.co.uk/average-salary-in-london-big-cities/

[6]https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/691917/households-below-average-income-1994-1995-2016-2017.pdf

[7] “What Immigration system should Briatin adopt after Brexit?” – The Economist, September 20th, 2018

[8] http://www.oecd.org/economy/luxembourg-economic-forecast-summary.htm

[9] https://www.telegraph.co.uk/news/2018/06/28/uk-population-growing-slowest-rate-14-years-fewer-eu-migrants/

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