EUROSCOPE. UK gambles with immigration policy

To the east of central London, lies Old Street, once a dowdy roundabout; it’s had a new lease of life over the past decade as the centre of London’s tech boom. London’s digital boom has spread eastwards, as the city took advantage of the development boom around the 2012 Olympics, and is home to vibrant small startups as well as giants of the tech world such as Cisco, Facebook and Google, making it arguably the biggest tech hub in Europe.

Consultancy EY estimates that over 1,000 tech projects were located in London in the 10 years to 2014. The natural growth of the industry was boosted by central and local government backing, as well as the country’s ability to lure some of the best and most ambitious talent from across the world.

According to the Global Talent Competitiveness Index by Adecco earlier this year, which measures countries’ ability to compete for international talent, Britain ranked seventh globally (after Switzerland, Singapore and the US; India ranked 89th).

But could Britain’s status as a growing tech and digital hub be impacted, should the Migration Advisory Committee, a public body that advises the UK government on its immigration policy have its way? Some believe so.

In a report published last month the committee is recommending major changes to the Tier 2 visa route — the most popular route for companies to bring skilled non-EU migrants to work in the country. This includes India’s software and services companies, which use their “intra-company transfer route” to undertake long or short-term work in Britain.

The detailed MAC report covers many aspects of the Tier-2 immigration system. The proposals would make it harder and more expensive for firms to hire talent from abroad, and would toughen the intra-company transfer route.

Recommendations include an annual levy of £1,000 annually on firms for every worker hired from outside the EU, as well as raising of the minimum salary by over 40 per cent to £30,000 a year, and for those working as third party contractors to £41,500.

The MAC hopes the changes will not only cut numbers arriving by this route significantly, and focus it on those coming for highly skilled jobs in the city, but that the levy could be used to skill domestic workers in the UK — something they argue in pointed terms in the report that firms employing Indian IT workers had failed to do in recent times.

Britain, like many countries, has struggled with the levels of skills in the country. In 2015, employers struggled to fill nearly a quarter of a million job vacancies — a fifth of the job vacancies that year — as a result of the skills gap.

The MAC proposals have been welcomed by some including unions — fearful of in-house jobs being outsourced to third party contractors in the UK — but the overwhelming reaction has been negative. Organisations such as the City of London Corporation — the municipal government for London’s financial district as well as the Confederation of British Industry — have both stressed the impact the changes could have to the growth of Britain’s IT and engineering sectors as well as to medium-sized businesses more widely, pointing to other recent charges incurred by businesses, including a levy intended to fund apprenticeships.

“It clearly signal that the UK wants only non-EU workers working in high salary industry (banking, accounting, law, finances),” says Josephine Goube, director of partnerships at immigration consultancy Migreat, who argues that in effect it will have wide ranging impact across industries.

“The danger of the measure is to harm the creative and more vocational jobs like chefs or musicians where salaries are never as high as those sectors. Not to speak about the healthcare sector, which relies heavily on migrant nurses.”

She adds, “A lot of startup companies are going to start thinking where they are based — and move to hubs like Berlin, Paris or Amsterdam.”

The proposals were unlikely to tackle the problems — reducing net migration and addressing the country’s skills shortage — that the MAC is seeking to tackle in the first place, argued Gagan Sabharwal of Nasscom in an interview with Businessline last week. “There is no text book solution to upskilling.”

He also pointed out that the vast majority of Indian IT workers coming to the UK came on short-term visas (for 12 months or the length of the project, which ever was lower), while even most of those who came on long-term visas were on lengths of 18 to 24 months.

From India’s perspective it could be worth examining the UK-India Bilateral Investment Protection Treaty --- whether a move such as MAC which adversely impacts operations of Indian companies in the UK could be found to be in breach of the core principles of the treaty, says Saionton Basu, partner at law firm Duane Morris.

“In particular, a number of investment claims are based on breach of the fair and equitable treatment standard, which mandates states to have a stable and predictable legal framework regulating investments which meets the reasonable expectations of the investors.”

But there may be another way of looking at the measures too, argues Basu. The boom in Indian workers coming to the UK through the ICT route was the unintended result of the policy of cutting net migration numbers not being sufficiently embedded in the actual regulations.

“The rules were never very well-drafted…they were intended to focus on higher skilled workers from overseas with shortage occupations but were never able to define skills or shortages very well… so low cost workers have been able to come in, and businesses liked the opportunities they presented.”

This, he argued, enabled large UK businesses, who form a large part of the customer base for the ICT workers, to keep costs low. The MAC changes, though likely to cut margins for Indian outsources, and raise costs for businesses in the UK, could in the long run have a welcome impact.

“For too long, Indian companies have had the image of cyber coolies of the world, rightly or wrongly. Thus if the profitability of sending low-cost workers fell, they would have to focus on more innovative value added projects — something which some of these companies are already doing. They will have to rethink their business model, and focus higher up the value chain.”

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