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PwC

Global outlook

UK economic prospects

What might be the impact of lower EU migration to UK after Brexit?

‘Twin puzzles’ – UK productivity and export growth since the crisis

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November 2017UK Economic Outlook

Our analysis of the potential economic impact of migration to the UK from the EU covers:

1. Past trends in migration to the UK from other EU countries, including details of sectoral and regional variations and relative skill levels for migrant and native workers.

2. An analysis of the potential longer term economic impact of alternative scenarios for net migration to the UK from EU27 countries until 2030 using PwC’s Computable General Equilibrium (CGE) model of the UK economy.

3. We consider two alternative UK population scenarios published by the ONS on 26th October 2017. We would stress that these are purely illustrative and should not be interpreted as predictions of what will happen to migration after Brexit, which is subject to many uncertainties at present. The two ONS scenarios are:

Principal population projection (the baseline in our CGE model analysis)

Variant with future net migration from the EU reduced by 50%

November 2017UK Economic Outlook

Lower migration from the EU would reduce the working age population while leaving a higher proportion of older people

Source: PwC analysis based on ONS population projection variants

-0.20% -0.15% -0.10% -0.05% 0.00% 0.05% 0.10% 0.15%

0-14

15-29

30-44

45-59

60-74

75 & over

Figure 3.9: Percentage point difference in the proportion of the UK population in each age-group between the "Principal" baseline and "50%

EU migration reduction" scenario

November 2017UK Economic Outlook

UK GDP estimated to be around 1.1% lower in the “50% EU migration reduction” scenario than in the baseline scenario (equivalent to around £22 billion at 2017 GDP values)

Source: PwC analysis based on ONS population projection variants

-1.2%

-1.0%

-0.8%

-0.6%

-0.4%

-0.2%

0.0%

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Figure 3.7: % Difference in UK GDP between the "Principal" baseline and "50% EU migration reduction" scenario

November 2017UK Economic Outlook

But UK GDP per capita is expected to be only around 0.2% lower in 2030 in the 50% reduction in EU migration scenario (equivalent to around £60 per person at 2017 values)

-0.2%

-0.2%

-0.1%

-0.1%

0.0%

0.1%

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Figure 3.8: % Difference in UK GDP per capita between the "Principal" baseline and "50% EU migration reduction" scenario

Source: PwC analysis based on ONS population projection variants

November 2017UK Economic Outlook

Our analysis of the ‘twin puzzles’ of why UK productivity and export growth has been relatively weak since the crisis, written by our senior economic adviser, Andrew Sentance, covers:

1. Analysis of past trends in UK output and productivity growth relative to other G7 economies

2. A new estimate of relative productivity levels between the UK and other G7 economies

3. A discussion and assessment of the possible reasons for relatively weak UK productivity and export growth since the crisis

4. Summary and policy implications

November 2017UK Economic Outlook

UK export volume growth (for goods and services combined) has been the lowest of the G7 economies since 2010, despite the sharp fall in the pound seen in 2007-9

0% 1% 2% 3% 4% 5% 6%

UK

Canada

France

US

Italy

Germany

Japan

Source: IMF World Economic Outlook (October 2017)

Figure 4.5: Export growth in G7 economies since the crisis

% p.a. increase in volume of goods and services exported, 2010-17

November 2017UK Economic Outlook

Contacts for more information about this report

John Hawksworth (chief economist) – john.c.hawksworth@pwc.com

Andrew Sentance (senior economic adviser) – andrew.w.sentance@pwc.com

Yuval Fertig (economist) – yuval.fertig@pwc.com

Jamie Durham (economist) – jamie.durham@pwc.com

Saloni Goel (economist) – saloni.x.goel@pwc.com

For more information on our Economics services, or to access the full report, please see our website at:

http://www.pwc.co.uk/economics

http://www.pwc.co.uk/ukeo

This publication has been prepared for general guidance on matters of interest only, and does

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