What impact will the new immigration rules have on UK Manufacturing?

The introduction of the new immigration rules on 1st January represent the biggest change to the UK’s immigration system in almost five decades, and whether you look at it from a positive or a negative viewpoint, leaving the EU and the subsequent introduction of the new immigration rules will have a profound impact on UK manufacturing.

For this month’s Tech in Focus I will be looking at four issues which will have an impact on the UK’s manufacturing sector.

Access to EU labour will be significantly reduced

Data from the Office of National Statistics suggests that EU nationals account for 13% of all employees in the manufacturing industry. Across the whole economy EU nationals account for 7% of all employees, therefore it is clear that the end of freedom of movement is going to have a greater impact on manufacturing than it will on most of the wider economy. 

The biggest impact will be felt by labour intensive areas of the industry that rely on large numbers of low skilled workers. To illustrate this, 33% of the food manufacturing workforce are EU nationals, which is one of the highest proportions in any industry. Businesses will ultimately be able to continue to hire skilled workers from the EU (albeit with added cost and bureaucracy), however going forward it will no longer be possible to hire low skilled workers from the EU. This is likely to cause some short term disruption, however a number of industry commentators believe that this may result in businesses investing in automation. As we have seen throughout the Covid-19 pandemic necessity truly is the mother of invention, therefore plenty of businesses may see this as high time to press ahead with long overdue investments in process automation.

Short-term mobility of labour between the UK and the EU will fundamentally change

Now that the UK has left the EU, any EU nationals who need to travel to the UK for business visits will need to meet the Visitor Rules, as set out in the wider Immigration Rules.

For manufacturers operating in multiple countries around Europe, being able to send staff to their various sites for visits and short term projects is of paramount importance. As prime examples of this, car manufacturers and the aerospace industry regularly need to move people between the UK and the EU for short periods of time to help with projects such as setting up a new production line or problem solving. Indeed, a recent House of Commons report found that Airbus employees make approximately 80,000 business trips between the UK and the EU every year.

Whilst the UK’s visitor rules do allow for a limited number intra-corporate activities, they are very prescriptive and will come as quite a shock to businesses that have never needed to engage with the immigration rules. The introduction of the Frontier Worker permit offers some assurance to bigger manufacturers as this will allow EU nationals that do not live in the UK but need to frequently travel to the UK for work to be able to continue doing so, however is still a long way from freedom of movement.

It’s abundantly clear that there are a number of challenges ahead for UK manufacturers, however it’s not all bad news when it comes to the new immigration system….

A big opportunity for global manufacturers to address talent retention

As a result of the end of freedom of movement and the resulting drop in net migration from the EU to the UK, the government now has significantly increased flexibility when it comes to net migration from the rest of the world to the UK. This flexibility means that it is now significantly easier to recruit from non-EU countries than it has been in the past.

The introduction of the new immigration rules means that businesses that already have mature global mobility programmes can look again at how to best deploy their talent, and allow more areas of their organisation to benefit from the opportunities that global mobility present. Many manufacturing businesses already make good use of moving their talent around the world, and in the UK rely heavily on the Intra-Company Transfer (ICT) category to meet their requirements. The ICT category serves a very specific purpose of facilitating fixed term assignments, however it does have its limitations when it comes to longer term talent retention. Now that Resident Labour Market Tests and the annual cap on the old Tier 2 (General) category (now called the Skilled Worker category) have been removed, there are even fewer reasons why businesses should feel locked in to relying on the ICT category. With the new Skilled Worker category, businesses can now take a much more strategic view of how their global talent is best utilised in the UK, and put more focus on long term career development rather than short term targets.

Lowering the skill and salary thresholds for Skilled Workers opens up new labour markets

Thanks to lowering the skill and salary thresholds required to sponsor an employee under the Skilled Worker category, there is now more scope to sponsor employees that work in skilled roles that didn’t previously meet the skills threshold. 

To put some context to this point, under the old Tier 2 (General) category the role needed to have a skill level of degree level or above and a salary of at least £30,000, however under the Skilled worker category the skill level has been lowered to A level and the salary threshold to £25,600. The introduction of tradable points also means that the salary can be as low as £20,480 as long as points are scored in other areas (e.g. the role is on the Shortage Occupation List).  

In addition, by lowering the skills threshold a number of roles specific to the manufacturing industry are now eligible for sponsorship which previously did not meet the skills threshold. Good examples of these types of roles are manufacturing engineers, workshop managers, clothing manufacturers and IT systems administrators. For businesses that have not previously been able to use the immigration system because of the type of work they do this opens new labour markets, especially in sectors where a particular country or region is very good at developing a particular skill set.

To summarise, there are going to be challenges to overcome in addressing potential skills shortages and getting to grips with how the new system operates, however it is important to highlight that there are opportunities out there for businesses that take the time to prepare and invest in the right areas.  

To offer some practical measures as a final thought, manufacturing businesses operating in the UK should think about the following areas;

• Ensure your current EU workforce can stay in the UK – promote the EU settlement scheme and seek legal advice for complex cases;
• Take advantage of the Frontier Worker permit, the government are not charging any application fees for the permit in order to incentivise companies so make use of this;
• Use the new immigration rules as a good excuse to update your global mobility and recruitment strategies in order to make best use of the opportunities the new rules present;
• Make strategic decisions when thinking about sponsoring employees under the Skilled Worker visa. Hiring from overseas comes with significant up-front costs so focus on roles that have a big ‘value-add’ element to them.