Conservative immigration plans 'could shrink economy'

The Conservatives’ plans to reduce immigration to the hundreds of thousands could shrink Britain’s economy by up to 3 per cent, according to a new report.

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Analysis published by the independent Centre for Economics and Business Research, seen by the Financial Times, suggests the size of the UK economy could fall by between 1.5 and 3 per cent by 2025.

That could mean a further hike in public borrowing to around £15.6bn a year by the middle of the next decade, they say.

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Douglas McWilliams, founder of CEBR and author of the report, argued that a major reduction in immigration could see the economy shrink by between 4.1 and 5.7% by 2030.

“If the UK cuts off migration without making adjustments to boost productivity, especially productivity in the public sector, the scale of the economic damage could be huge,” he said.

He added that with fewer people in the UK, gross domestic product (GDP) per person be less affected, but would still be 1.9 to 2.7 per cent lower than otherwise at the end of the next decade on his estimates.

Professor Jonathan Portes of King’s College London also found that cutting net migration would make the UK “poorer”, although added that the estimates are “highly uncertain”.

“The best evidence suggests cutting net immigration will make us poorer,” he said.

“It is not just a reduction in the size of the economy, but people, on average, will be poorer and this will come with worse public finances.”

The Office for Budget Responsibility last year estimated that a fall of 80,000 in annual net migration would increase government borrowing by £6bn a year.