New analysis reveals significant impact on immigration if UK leaves EU

by Ray Clancy on May 26, 2016

If the UK decides to leave the European Union there would be s significant reduction in immigration, according to a new research report.

The analysis published by the National Institute of Economic Research (NIESR) shows that this reduction would lead, in the long run, to lower GDP per capita which in turn would necessitate higher taxes.

However, the report points out that although the impact is significant it is not quantitatively large and would take a considerable time to materialise.

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The model used in the research brings together labour market, fiscal and other macroeconomic effects into one framework. It also adds a dynamic perspective, differentiates between natives and different categories of immigrants and captures compositional effects resulting from immigrants different age and qualification profiles.

An NIESR spokesman said that these features make this research the most comprehensive analysis of the long term impacts of immigration on the UK economy to date.

The paper compares Leave and Remain scenarios for migration to the UK after the referendum on 23 June, and assesses their macroeconomic impacts.

The Leave scenario assumes that net migration from the EU countries will decline by two thirds compared to Remain. By 2065, in the Leave scenario, aggregate GDP and GDP per person are 9% and 1% lower respectively compared to the Remain scenario.

The report also says that reduced migration after leaving the EU would have a significant negative impact on the public finances, primarily because of a higher dependency ratio, which is the fraction of young and old people of the total population.

Accordingly government spending rises as a share of GDP by 1.1 percentage points in 2065, requiring an increase in taxation of about £400 per person. As a result, post-tax wages are 2% lower in the Leave scenario.

It concludes that leaving the EU would have a rage of economic consequences for the UK. “Our research shows that lower migration has an overall negative effect on the UK economy. In general EU immigrants benefit the UK economy for two main reasons, they are on average much younger and are more highly qualified than the general population,í said Katerina Lisenkova.

Lord Green of Deddington, chairman of Migration Watch UK, described the report as “an important piece of work from a significant institution”. He said what it shows is that the economic benefits of continued mass immigration are trivial when set against the wider costs of an extra population of the order of just under four million.

“Specifically, it provides clear evidence that any advantage from high levels of immigration over the long term amounts to less than 1% of GDP per capita even after 50 years,” he pointed out.

“The NIESR rightly point out that this does not capture the costs of higher immigration resulting from, for example, increased congestion or the potential social impact. The case for mass immigration, if there ever was one, is blown out of the water,” Green added.

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