How Refugees Can Help Britain’s Economy Post-Brexit

In the aftermath of Brexit, British politicians have strategically avoided the refugee crisis. Even while campaigning for the EU referendum, the Remain camp paid little attention to the subject over fears of dividing voters sympathetic to the ideals of the pan-European project. It’s not difficult to see why. Britons watched 1.1 million refugees pour into Germany in 2015.[1] Fears of a similar reality in the UK drove many citizens to vote Leave on June 23.

The UK has been largely unaffected by the influx of refugees from the Middle East and North Africa. Following Brexit, migrants’ path to the UK doesn’t get any easier. Although integrating such a large number of migrants isn’t without its challenges, there is an economic case for accepting them.

For all the challenges associated with the refugee crisis, it is already having a “sizeable” positive impact on the EU, according to the European Commission. Economists at the central agency say refugees will have a positive impact on economic growth, employment and long-term public finances in settlement countries such as Germany and Sweden. The Commission said that the three million expected arrivals by the end of 2016 would boost annual GDP by up to 0.5%. The positive impact won’t be felt on Britain, which accepts only 4,000 refugees a year.[2]

Brexit may have been a monumental achievement for British nationalists, but it is widely expected to diminish short-term economic prospects. Uncertainty over future UK-EU trade relations is also expected to weigh on consumer spending and business investment – two key pillars of the economy. For that reason, the Bank of England has slashed its growth outlook following Brexit, warning of a significant slowdown in economic activity.

The Bank now expects GDP to grow 0.8% in 2017, a fraction of the pre-Brexit forecast of 2.3%. That was the biggest downgrade ever. As a result, policymakers expanded their economic stimulus program and slashed interest rates to a new all-time low.[3] The Bank has also stated that it could boost stimulus measures even further to protect against the Brexit blowback.

Asylum seekers won’t fill the whole gap, but could contribute positively to overall growth. The 0.5% annual increase referenced by the European Commission is equivalent to gaining about one quarter’s moderate GDP growth in an advanced EU economy, such as Britain.

Increased government activity from processing and resettling refugees could also have a positive impact on national budget because of migrants’ contributions. In the case of the UK, this could actually increase public finances.[4]

The multiplier effect of refugees (or any migrant class, for that matter) is also significant. Migrants earn wages, spend money and stimulate the economy to the benefit of the entire nation. To achieve those gains, however, it’s critical for countries to integrate refugees and provide them with a path to employability.

Despite popular perceptions, migrants do not have a major impact on employment or wages, especially in highly skilled advanced nations. In fact, existing migrants and unskilled workers are usually the most vulnerable. According to a recent study by Oxford University, a ten-percentage-point increase in the share of migrants working low-skilled positions depressed earnings for those jobs by just 2%.[5] And while migrants do displace native workers in some low-skilled professions, the impact is net positive, since those displaced often switch to higher paying jobs with less manual labour.

Migrants have also been shown to contribute positively to population growth in advanced societies with low fertility rates. Migration has already contributed positively to Britain’s fertility rate, which is currently at 1.9 children. Although this is still below the 2.1 figure that’s required to sustain natural population growth, it has increased 12% between 2003 and 2013. The UK is now ranked third in the EU for fertility behind France and Ireland.[6]

There’s no easy way to solve Europe’s refugee crisis. Uncontrolled immigration certainly isn’t the answer, and countries should reserve the right to devise their own immigration strategy. However, there is a strong case for accepting refugees both as a nation-building strategy and for economic reasons. While Britain is unlikely to open its doors following Brexit, it does stand to benefit from expanding its allowance from around 4,000 a year to a higher number.

[1] The Economist. “The economic impact of refugees: For good or ill.”

[2] Jon Stone (November 5, 2016). “The refugee crisis is actually having a ‘sizable’ economic benefit in European countries, EU says.” The Independent.

[3] Dan Cancian (August 4, 2016). “Bank of England slashes growth forecast for 2017 amid Brexit impact.” IB Times.

[4] Jon Stone (November 5, 2016). “The refugee crisis is actually having a ‘sizable’ economic benefit in European countries, EU says.” The Independent.

[5] The Economist. “The economic impact of refugees: For good or ill.”

[6] Afua Hirsch (December 24, 2015). “Britain Defies Europe’s Falling Fertility Rate.” Sky News.

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