Bringing it all back home

London has had a rough two years since the pandemic started. The capital has been at the forefront of successive waves of Covid, commuters and tourists have stayed away, and Transport for London seems to be being kept alive by government in much the same way that a mouse is kept alive by a bored but malevolent cat.

In some of the city’s bleaker moments commentators have wondered whether it will ever recover – some doing little to disguise their glee. At the beginning of last year, decline enthusiasts seized on an analysis of Labour Force Survey stats, which estimated that London’s population might have declined by 700,000 – nearly eight per cent – since the beginning of the pandemic, mainly as a result of foreign workers leaving the capital. Would these workers ever come back? Would the city ever recover?

New statistics out this week from the Office for National Statistics suggest that, while employment of foreign workers in London has fallen, any exodus has been a trickle rather than a flood. Between June 2019 and June 2021, payroll employment fell by around 110,000 in London. Broken down by nationality, employment fell by 40,000 for UK nationals and by 85,000 for European Union nationals, but rose by 15,000 for other foreign nationals.

The chart below tracks employment numbers compared to June 2019. Across the country, UK and EU employment has fallen while employment of people from the rest of the world has risen. The switch from EU to broader international immigration reflects the UK’s new immigration regime, introduced at the beginning of 2020, which gives EU citizens the same status as people from other countries.

Screenshot 2022 03 03 at 16.29.29

The trends are similar in London to the rest of England, but the falls were deeper and steeper in the capital and recovery has been slower, as industries such as hospitality have struggled to emerge from the pandemic. But the changes are much less dramatic than previous estimates suggested. Even in the first year of the pandemic only 100,000 European workers left employment, and by spring 2021 the trends were being reversed for all groups. EU worker employment increased by 20,000 between January and June 2021.

There are some striking differences between sectors too, some more surprising than others. The sector with the steepest job losses, hospitality, saw a reduction of 30 per cent in employment of EU workers. It remains to be seen how far these numbers will rise again as London’s commuters and tourists return, and whether new jobs will be taken by UK, European or other overseas workers. Towards the end of last year a staffing crisis hit hospitality, but the government has ignored calls to make work permits available for more roles in the sector.

Other areas with sharp EU job losses included administration and arts, entertainment and recreation. In construction, on the other hand, the EU workforce grew by 12 per cent between 2019 and 2021, and the number of other international workers by 15 per cent, while the UK national workforce remained unchanged.

We should not place too much store by these figures. They estimate the number of people employed using HMRC payroll data, so they are not precisely equivalent to job numbers, still less to population numbers. But they do give an indication of the direction and scale of change.

Can we conclude anything about population numbers? At a push. If we take UK nationals out of the picture and make the (fairly bold) assumption that the ratio of population to payroll employment for the EU and international workers was roughly the same in 2021 as it was in 2019, it looks like London’s foreign national population might have dropped by around 100,000 in the two years to June 2021. That is a big drop in a city used to net international immigration of 80-100,000 people every year, but it is a lot a lot less than some estimates and it looks as if London is already well on the way to making up lost ground.

Two years ago, I suggested that the shift to non-EU immigration would favour London, all other things being equal. All other things have certainly not been equal, but London’s loss of overseas workers to date has been in line with the colossal international disruption we have seen over the past two years. As we recover and our global connections re-open, London’s growth may once again be turbo-charged by international migration.

Could tighter border controls boost London\’s population (July 2019)

[Published on Centre for London blog, 26 July 2019]

After easing off in 2017, London’s population growth picked up pace last year to hit 83,000, with a resurgence in international immigration the principal cause of the recovery, as illustrated in Centre for London’s most recent edition of The London Intelligence.

The latest ONS population projections suggest that London will continue to grow at around this level in the coming years, adding 774,000 residents over the period 2016-26; growth of 8.8 per cent. The capital will still be the fastest growing English region, but will not be growing as fast as it did in the ten years to 2017, when growth was estimated at 1.1 million residents (15 per cent). Net international immigration outstripped net domestic out-migration by around 10 per cent last year, but the ONS forecast the net impact to be more balanced in future with natural change (births minus deaths) continuing to account for the expanding population.

Looming over these projections, however, is the spectre of Brexit. Leaving the European Union will definitely have an impact, but what will it be? It could be that the UK’s departure will lead to an even sharper slowdown in migration; certainly immigration tailed off during the two years of limbo since the referendum, and remains much lower than it was in 2015 or 2016. Given London’s high migrant population, this could hit the capital, and its economy, particularly hard.

But beyond the current hiatus, post-Brexit immigration rules could do precisely the opposite. Notwithstanding the change of government (and any deals done as part of future trade negotiations), the plan appears to be for EU and other migrants to be on an equal footing. Immigration from within the EU may fall back, while immigration from further afield may rise or at least stay steady. The London Intelligence already shows a rebalancing in the number of national insurance numbers issued to EU and non-EU nationals: the former were six per cent lower in the year to March 2019 than in the previous year; the latter were 21 per cent higher.

This matters because immigration from beyond Europe tends to have a different geographic distribution from European migration. Specifically, it is more concentrated in London and – to a lesser extent – other cities. While London has just over twice as many EU migrants in its working age population as non-urban areas of England and Wales do, it has four times the proportion of people born beyond the EU. Similarly, while the largest ‘core cities’ (Birmingham, Bristol, Cardiff, Leeds, Liverpool, Manchester, Newcastle, Nottingham, Sheffield) have similar levels of EU-born working-age residents to the rest of the country, they have twice the proportion of people born further afield.

% of 16-64 year old population born in other EU countries % of 16-64 year old population born in non-EU countries
London 14 32
English and Welsh core cities 7 16
Rest of England and Wales 6 8

So more immigration from outside the EU, and particularly from emerging economies of the southern and eastern hemispheres, may mean more concentration in London and other big cities, where people from these countries will already find settled communities of their former compatriots.

And in London, this trend may be intensified by another element of the government’s proposals, a pay threshold for jobs held by foreign workers – designed to prevent the import of cheap unskilled labour. The government has not confirmed what this threshold should be but the Migration Advisory Committee recommended maintaining the current level of £30,000 (while abolishing other requirements such as the ‘resident labour market test’, which requires jobs to be advertised within the UK before recruiting overseas).

While many jobs in London, particularly in migration-dependent sectors such as restaurants, pay poorly, salaries are significantly higher overall. Government data on earnings show that 66 per cent of workers in London earn more than £30,000 pa, compared to 30 to 40 per cent of workers in other regions. So setting a minimum pay threshold – whether at £30,000 or at lower levels, as groups such as London First have argued – could further concentrate immigration in London, where more jobs would in theory be accessible for foreign workers.

Giving preference to immigrants with higher qualifications, through a more ‘points-based’ system as advocated by Boris Johnson during the Conservative leadership campaign, could further focus immigration in the capital, as immigrants who settle in London also tend to be more qualified.

These factors, together with perceptions of London as a city that is still open to immigrants, may serve to focus future international immigration on the capital, potentially turbo-charging population growth. This may look superficially serendipitous: London, the part of England most at ease with immigration and most opposed to Brexit, may see a resurgence in immigration, while changing demographics, and tougher salary and qualification requirements may curb immigration beyond the M25.

But it may also deepen economic as well as cultural differences between London, other cities and the rest of the UK. While London continues to make the case for infrastructure to support a growing population, other regions may start seeing population decline, as their economies struggle without the migrant workforce that farmers, restaurateurs and hoteliers rely on.

We may even, in time, see a shift in the tone of national debate, with politicians making the case for immigration rather than avoiding the subject – or even seeking to implement policies to encourage immigrants to look beyond the big cities as in Canada. As with so many aspects of Brexit, seemingly simple moves can have complex, surprising and far-reaching consequences.

My thanks to Professor Tony Travers of the LSE for his insights and help with this article.