Brexit Was Expected to Slash Immigration. Instead It Hit a Record.
U.K. government has allowed in more students, higher-skilled workers and families fleeing Ukraine and Hong Kong
U.K. government has allowed in more students, higher-skilled workers and families fleeing Ukraine and Hong Kong
LONDON—When the U.K. voted to leave the European Union in 2016, many backers of Brexit hoped the move would cut immigration by ending the right of EU residents to move here freely, a growing trend that some Britons felt was taking jobs away from locals.
Instead, immigration has risen to a record high, as growing numbers of migrants from non-European countries have outstripped a sharp decline in those from the EU. Though the ruling Conservative Party has repeatedly pledged to cut migrant numbers post-Brexit, it has instead let in more in a bid to boost stagnant economic growth.
Data released on Thursday by the Office for National Statistics showed that net migration during 2022 rose by 606,000, the largest increase on record. The figures don’t include migrants who arrived illegally on boats across the English Channel, the number of whom surged 60% last year to a record of about 45,000.
“Numbers are too high, it’s as simple as that, and I want to bring them down,” Prime Minister Rishi Sunak said Thursday.
The U.K. experience illustrates that even if industrialised nations want to curb migration, and take drastic steps to do so, they can come under pressure to allow it to avoid economic damage from labor shortages. In the U.K., the labor force is now smaller than it was pre pandemic, and some industries have complained they can’t find enough workers.
It also underscores the political headache this trade-off presents. Thursday’s immigration numbers elicited criticism among some Conservative Party lawmakers, who said voters wanted this influx brought down. Sunak’s government announced new restrictions this week on how many family members visa-holding students could bring to the country. Polls show that Britons have mixed views on whether migrants are a boon or not, but they put a lot of weight on whether the government is seen to be controlling the flow of people into Britain.
Contributing to the rise was the granting of humanitarian visas to some 300,000 people from Ukraine following the Russian invasion and from Hong Kong amid growing political repression in the former British colony. But it was also fuelled by a sharp rise in visas for students and workers from non-EU countries. About 136,000 visas were granted to students’ families in 2022, an eightfold increase from 2019.
Most economists agreed that Brexit would liberalise trade with the rest of the world but raise trade barriers with the EU, Britain’s largest trade partner, and that the net economic effect would be negative. Most economists also expected that greater migration from the rest of the world wouldn’t be enough to compensate for the decline in European migrants, another net negative, said Jonathan Portes, an economist at King’s College London who tracks immigration.
“We were right about the first part and wrong about the second,” he said. “We were right about the basic economics, but a policy that what we thought would be a modest liberalisation [of migration with the rest of the world] has turned out to be de facto quite a significant liberalisation” he said.
Whether the increase in numbers is part of a longer-term trend is still too early to tell, said Madeleine Sumption, the director of the Migration Observatory at the University of Oxford. Many of the students who have arrived in the U.K. will eventually leave and there will likely be less migration from Ukraine and Hong Kong in coming years. That could push down the numbers toward the longer-term average of about 200,000 to 250,000 a year.
Before Brexit, any EU national had the right to settle and work in the U.K. During the referendum, the “Leave” campaign said the U.K. should have more control over who entered the country. After voting to quit the EU, the U.K. government in 2021 introduced a new immigration system that only allowed in people who met certain criteria—such as being paid 26,200 pounds a year, equivalent to $32,400, or having certain levels of qualifications. This system was aimed at avoiding a glut of low-paid workers into the U.K., which had fueled the backlash against immigration, while encouraging companies to invest more in their workforces and increase pay.
In 2022, total long-term immigration, measured as anyone who stays for longer than a year, was estimated at around 1.2 million. Of that total, 925,000 were from non-EU nations.
Even now, as the government has allowed more visas for higher-skilled jobs from doctors to bankers, it has tried to resist letting in lower-skilled workers.
“What they’re not willing to do, by and large, is open up to low-wage jobs, which previously had been done by EU workers,” said Brian Bell, chair of the U.K.’s Migration Advisory Committee, which advises the government. It also meant that EU workers no longer got preferential access to the U.K., vastly increasing the influx from countries such as India.
This new system, however, was implemented just as a worker shortage and high inflation started to take hold during the pandemic. The U.K. is the only major Western economy whose workforce is still smaller than it was pre pandemic, due to a combination of long-term illness, lower immigration from Europe and people taking early retirement. The Bank of England said those shortages have stoked inflation as companies have been forced to increase wages to attract workers, while other companies simply can’t grow because they can’t find enough workers.
What is clear is that illegal migration has an impact on public opinion. The U.K. government has focused on stopping illegal migration, largely in the form of small-boat crossings from France. Sunak has repeatedly pledged to clamp down on this and has signed a deal with France to help bust smuggling rings. The government is also threatening to deport migrants who arrive illegally to the African country of Rwanda. This policy has so far been blocked by the courts.
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Competitive pressure and creativity have made Chinese-designed and -built electric cars formidable competitors
China rocked the auto world twice this year. First, its electric vehicles stunned Western rivals at the Shanghai auto show with their quality, features and price. Then came reports that in the first quarter of 2023 it dethroned Japan as the world’s largest auto exporter.
How is China in contention to lead the world’s most lucrative and prestigious consumer goods market, one long dominated by American, European, Japanese and South Korean nameplates? The answer is a unique combination of industrial policy, protectionism and homegrown competitive dynamism. Western policy makers and business leaders are better prepared for the first two than the third.
Start with industrial policy—the use of government resources to help favoured sectors. China has practiced industrial policy for decades. While it’s finding increased favour even in the U.S., the concept remains controversial. Governments have a poor record of identifying winning technologies and often end up subsidising inferior and wasteful capacity, including in China.
But in the case of EVs, Chinese industrial policy had a couple of things going for it. First, governments around the world saw climate change as an enduring threat that would require decade-long interventions to transition away from fossil fuels. China bet correctly that in transportation, the transition would favour electric vehicles.
In 2009, China started handing out generous subsidies to buyers of EVs. Public procurement of taxis and buses was targeted to electric vehicles, rechargers were subsidised, and provincial governments stumped up capital for lithium mining and refining for EV batteries. In 2020 NIO, at the time an aspiring challenger to Tesla, avoided bankruptcy thanks to a government-led bailout.
While industrial policy guaranteed a demand for EVs, protectionism ensured those EVs would be made in China, by Chinese companies. To qualify for subsidies, cars had to be domestically made, although foreign brands did qualify. They also had to have batteries made by Chinese companies, giving Chinese national champions like Contemporary Amperex Technology and BYD an advantage over then-market leaders from Japan and South Korea.
To sell in China, foreign automakers had to abide by conditions intended to upgrade the local industry’s skills. State-owned Guangzhou Automobile Group developed the manufacturing know-how necessary to become a player in EVs thanks to joint ventures with Toyota and Honda, said Gregor Sebastian, an analyst at Germany’s Mercator Institute for China Studies.
Despite all that government support, sales of EVs remained weak until 2019, when China let Tesla open a wholly owned factory in Shanghai. “It took this catalyst…to boost interest and increase the level of competitiveness of the local Chinese makers,” said Tu Le, managing director of Sino Auto Insights, a research service specialising in the Chinese auto industry.
Back in 2011 Pony Ma, the founder of Tencent, explained what set Chinese capitalism apart from its American counterpart. “In America, when you bring an idea to market you usually have several months before competition pops up, allowing you to capture significant market share,” he said, according to Fast Company, a technology magazine. “In China, you can have hundreds of competitors within the first hours of going live. Ideas are not important in China—execution is.”
Thanks to that competition and focus on execution, the EV industry went from a niche industrial-policy project to a sprawling ecosystem of predominantly private companies. Much of this happened below the Western radar while China was cut off from the world because of Covid-19 restrictions.
When Western auto executives flew in for April’s Shanghai auto show, “they saw a sea of green plates, a sea of Chinese brands,” said Le, referring to the green license plates assigned to clean-energy vehicles in China. “They hear the sounds of the door closing, sit inside and look at the quality of the materials, the fabric or the plastic on the console, that’s the other holy s— moment—they’ve caught up to us.”
Manufacturers of gasoline cars are product-oriented, whereas EV manufacturers, like tech companies, are user-oriented, Le said. Chinese EVs feature at least two, often three, display screens, one suitable for watching movies from the back seat, multiple lidars (laser-based sensors) for driver assistance, and even a microphone for karaoke (quickly copied by Tesla). Meanwhile, Chinese suppliers such as CATL have gone from laggard to leader.
Chinese dominance of EVs isn’t preordained. The low barriers to entry exploited by Chinese brands also open the door to future non-Chinese competitors. Nor does China’s success in EVs necessarily translate to other sectors where industrial policy matters less and creativity, privacy and deeply woven technological capability—such as software, cloud computing and semiconductors—matter more.
Still, the threat to Western auto market share posed by Chinese EVs is one for which Western policy makers have no obvious answer. “You can shut off your own market and to a certain extent that will shield production for your domestic needs,” said Sebastian. “The question really is, what are you going to do for the global south, countries that are still very happily trading with China?”
Western companies themselves are likely to respond by deepening their presence in China—not to sell cars, but for proximity to the most sophisticated customers and suppliers. Jörg Wuttke, the past president of the European Union Chamber of Commerce in China, calls China a “fitness centre.” Even as conditions there become steadily more difficult, Western multinationals “have to be there. It keeps you fit.”
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual