Home Office policies that aim to reduce net migration by restricting the entry of skilled workers bring significant risks to UK businesses, a cross-party panel of MPs has warned.
According to the all-party parliamentary group on migration, the governments moves to restrict labour migration from outside the European Union could damage companies at a time of increasing global competition for skills.
The panel - chaired by Jack Dromey, a Labour MP, with Lord Roberts of Llandudno, a Liberal Democrat peer, Stewart Jackson, a Conservative MP, and Jon Cruddas, a Labour MP, as its vice-chairs - delivered its warning in a briefing paper due to be published today. It was responding to Home Office reforms that introduced a limit of 21,700 work visas for non-EU immigrants for 2011-12, starting from April 6 this year.
The visa cap forms part of government efforts to drive down net migration to the tens of thousands by the end of the parliament, in line with a Conservative election pledge. Companies are not given individual quotas but have to compete for visas from the total allocation - although in a concession to business concerns, intercompany transfers are not included.
The business community has been subject to a major and rapid change within the system, Mr Dromey told the Financial Times.
Citing research by the Chartered Institute of Personnel and Development and KPMG, the professional services firm, showing that more than 20 per cent of private sector employers had reported recruitment difficulties as a result of the temporary cap trialled in 2010-11, Mr Dromey said evidence showed the new curb would have a negative effect on business efficiency.
We need to grow the economy and rebalance the economy, so we need to send positive messages internationally that the UK is open for business rather than sending a negative message to employers, he said.
But while migration experts said medical research, energy and engineering companies in particular have had difficulty in recruiting the skilled specialists they need in the wake of the cap, the initial figures on the take-up of visas this year showed that the first few months allocations have actually been under- rather than oversubscribed.
In April, a quarter of the visas available had been granted, while in May and June the figure was only about one in six.
Theresa May, the home secretary, told MPs on Tuesday that the surplus showed the cap was not a brake . . . on business re-quirements.
However, Gerwyn Davies, public policy adviser at the CIPD, interpreted the data as a sign of confusion among employers, who feared that if they put their time and money into the application process, they might be unsuccessful.
Many companies are now reporting skills shortages and vacancies, and this is strange against the backdrop of persistent high unemployment, he said.
A representative from a large multinational company said her business was concerned about the lack of flexibility in the new system. If business does pick up again, as it can do quite fast in cyclical sectors, the concern is that we wont have the means to act quickly to increase recruitment or negotiate over the quota, she said.
Companies need some sort of clarity for comfort and forward planning. We are actually looking into moving out of the UK to somewhere else in Europe.
Martin Ruhs, a labour economist at the Oxford Migration Observatory, suggested that the visa cap was less of a barrier to non-EU migrants than the newly raised skills threshold, which excludes many in the catering and social care sectors who are not considered highly skilled. Mr Ruhs said it was natural for businesses to lobby for the best possible access to skilled workers. The cap is not simply based on an analysis of the impact of immigration on the British economy, he said. Its set with the policy target of getting net migration down.
The Financial Times Limited 2011