Thursday 28 February 2013

Immigration is down. So are exports.

[This article originally appeared in City AM on Friday 1 March]

Wednesday's GDP figures confirmed that the UK economy shrank in the last quarter of 2012 – in large part because of the weakness of exports. So the government’s strategy of generating growth by rebalancing the economy towards investment (which is also weak) and exports is far from on track. But the government is at least making progress towards its objective of reducing immigration to the “tens of thousands,” with Wednesday’s figures showing net migration is down to the lowest level in four years. It was duly trumpeted as a policy success.

But could these two facts be related? Well, yes. The reduction in migration largely reflects a fall in the number of foreign students. And how do foreign students show up in the national accounts? As UK exports, of course. The Department for Business estimated that in 2008-09, education exports were worth roughly £15bn. And that’s not just tuition fees, nor does it just benefit the education sector. If an Indian student buys a Marks and Spencer’s ready meal in Sheffield, that’s a UK export to India: real money, generating jobs and growth, and improving the trade balance.

The government points to the fact that the reduction has come in the further education sector – where the number of visas issued fell by 62 per cent – not in those coming to universities here. So we are still getting the “brightest and the best”. But when it comes to exports, this makes no sense. We don’t apply this sort of quality threshold in any other sector. And no evidence suggests levels of fraudulent abuse high enough to warrant a 62 per cent drop. So it appears that many genuine students have been turned away.
Moreover, while it is true that the number of foreign students coming to universities is broadly flat, the number extending their visas (to go on to more advanced study, for example) fell by 10,000. So we have fewer foreign students at our universities, at a time when the global market is growing. Should we regard this as a policy success, as the government appears to? As Sir Andre Geim, the Russian-born Nobel prizewinner and professor of Physics at Manchester University put it, the identification of graphene would “probably not have happened if I had been unable to employ great non-EU PhD and post-doctoral students”.
It is simply not credible for the Prime Minister to claim that the UK is “open for business”, and for his chancellor to say that he is prepared to take the “difficult decisions” to boost growth, while at the same time making the primary objective of immigration policy the reduction of net migration. Immigration, like trade, can help boost productivity and growth over the medium to long term in a number of ways. It should therefore be central to our growth strategy. That will require a change of attitude and mindset on the part of government and policymakers. If we want to be serious about growth, we need to be positive about migration.

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