Hiring without FoM: What does it mean for the UK’s IT industry?

In March 2016 I wrote a piece arguing that, whether or not the UK remained in the EU, the current visa system needs a rethink if the growth of the country’s tech sector is to continue. Bluntly speaking, that hasn’t happened.

In the two and a half years since writing the article I’ve spent time in-house at ClearScore, one of the UK’s fastest-growing tech firms, and now know first-hand that visa application processes are slow, clunky and so unfit for purpose for these companies that they are effectively a non-viable option. When she announced an end to EU migrants “jumping the queue”, what Theresa May really meant is that UK-based employers will be disadvantaged compared to those of the other 27 EU member states. In the absence of any change to the Tier 2 visa system, rather than making it easier for UK companies to hire (more) non-EEA nationals, ending free movement only makes it harder to hire those with EEA passports. Put another way: pre-Brexit roughly 7%of employees in the tech sector (around 92,000 people based on latest ONS figures) needed a Tier 2 visa before starting work; post-Freedom of Movement, this number will double.

Irish border proposals notwithstanding, there’s been scant focus on technology in the Brexit debate so far. While many politicians and pundits lament the decline of the UK manufacturing, the country’s future should be seen in IT, a sector growing more than twice as fast as the UK economy as a whole. Per person, technology is also £10,000 more productive annually than other sectors. Access to talent is consistently one of the greatest challenges to digital companies. And while precise data on the makeup of the UK’s tech workforce more recently than 2015 is hard to come by, TechNation then painted a picture of an industry roughly equally reliant (for a total 13% of its employees) on EU and non-EU migrants, with the number of EU workers growing faster than non-EU. The equal split between EU and non-EU migrants is misleading; this indicates that tech hires a disproportionately high proportion of EU migrants compared to non-EU since net migration was more than three times higher from outside the EU than from EU27 countries in the twelve months to June 2018.

Table 1: Immigration, emigration and net migration to and from the UK by citizenship, UK, year ending June 2018. Source: Long-Term International Migration, Office for National Statistics

Most disturbing about those ONS figures is the sharp decline in net EU migration since 2015. 145,000 EU citizens emigrated last year. No small number of those will inevitably be IT professionals seeking more hospitable climes in the burgeoning tech hubs of Dublin, Lisbon, Amsterdam and Berlin. Despite this increase in emigration 74,000 more EU nationals moved here than left, but here’s the thing: that’s 10,000 less than in 2015, and there are still no legal hurdles involved in hiring an EU citizen. As things stand, from March 2019 the equivalent of the 219,000 EU nationals who migrated here will each have to out-compete (and thereby deny) a non-EU national for their place and the right to do so. In effect, this will more than wipe out the net 74,000 increase from the EU and will even come close to turning total net migration negative. In that scenario, an industry already facing major staff shortages whilst disproportionately dependent on migrant labour simply cannot grow.

What I consider the cream of the UK’s IT crop – small, agile, lean start-ups – will be worst hit. These companies struggle to access Tier 2 visa licenses compared to larger firms, and operate in a way that makes them more vulnerable to staff shortages and less able to shoulder the administrative burden of clunky, time-consuming application processes. Faced with the constant challenge of delivering promises to demanding investors and too cash-strapped to compete in a shrinking talent pool already teeming with ravenous sharks, these companies – that have spearheaded innovation and delivered disproportionately high tax revenues for their size over recent decades – will be snuffed out, their place taken eagerly by Irish, Portuguese, Dutch and German entrepreneurs.

The rapid growth of the UK’s IT sector has been made possible by freedom of movement from the EU, avoiding the cumbersome bureaucracy involved in the administration of Tier 2 visas. In the absence of a streamlined visa process, as well as a massive increase in the number of visas the government plans to issue annually, ending FoM spells the end of the most innovative edge of this high-growth, highly productive tranche of our economy.

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