Britain loses its luster for job seekers from Poland to Portugal
Bloomberg May 26, 2023
It's not just Brexit that's dried up the flow of European Union workers the U.K. used to depend on. From Poland to Portugal, E.U. economies are generating more jobs and better wages than Britain.
For the U.K., that means that arrivals from the E.U. of just over 150,000 last year were about half the level seen in 2019, according to figures released Thursday by the Office for National Statistics. That's despite a record 606,000 for net migration into the U.K. in 2022.
The shift in economic fortunes has added to the upheaval in Britain's labor market since the pandemic and the decision to exit the E.U. It's ended the traditional rite of passage for hundreds of thousands of people from southern and Eastern Europe who for years made the U.K. a destination for improving their job prospects and English skills.
"The number of people from eastern and southern Europe that have been willing to move has diminished over the second half of the 2010s," said John Springford, deputy director at the Centre for European Reform. "There's (also) the Brexit effect, which is just throwing grit into the wheels of low-skilled migration."
The absence of E.U. workers is exacerbating inflation and widespread staff shortages in the U.K. economy, denting the popularity of Prime Minister Rishi Sunak's government. It also underscores the transformed economic conditions across the English Channel after nations like Poland and Romania joined the union and a wrenching debt crisis fades into history.
Britain became home for many Europeans in the 2000s and 2010s, spurring economic growth by feeding workers to a range of industries from hospitality and retail to factories and food production.
But now, unemployment is down sharply across many of the euro-zone nations that supplied workers to the U.K. Wages and living standards have rapidly risen across Eastern Europe. The result is that more E.U. nationals are staying home, and migrants from there made up just 13% of the total flow into the U.K. in 2022. That's down sharply from 52% in 2018 and 42% in 2019.
Those who left the labor market in the pandemic combined with lower inflows from the rest of Europe have slashed the U.K.'s labor supply, helping to fuel the highest inflation rate in the Group of Seven nations. Even if European workers can clear Brexit immigration hurdles, fewer are willing to fill them.
Poland is at the heart of one of the biggest shifts. After joining the E.U. in 2004, hundreds of thousands of Poles moved to countries across the union including the U.K. Polish nationals became the U.K.'s biggest foreign-born population in the mid-2010s, leapfrogging India, as they sought better opportunities.
That trend now has reversed. Many Poles returned home in the pandemic.
Another factor is a shrinking prosperity gap between the U.K. and less affluent parts of Europe. World Bank data shows the U.K.'s gross domestic product per head on a purchasing power parity basis, which adjusts for different costs between countries, was more than double Poland's in 2001 but was only 29% higher in 2021. Wages have almost doubled in Poland and quintupled in Romania in the past 20 years.
"The labor market and the Polish economy experienced a dramatic change," said Pawel Bukowski, a research fellow at the London School of Economics who moved to the U.K. from Poland in 2016. "We basically - starting from a very, very low level of economic development in the early 1990s and low level of real wages - managed to catch up."
The change in fortunes is rising on the U.K. political agenda. Keir Starmer, the leader of the opposition Labour Party, warned that Poland is on track to surpass the U.K. in per capita GDP by 2030, blaming the Conservatives for allowing Britain to fall behind.
Piotr Arak, director of the Polish Economic Institute, called the prediction overly optimistic for Poland but noted that its economy has grown extremely rapidly in recent decades.
"In Poland, some regions and some cities became very competitive," Arak said. "With the wage you can get here, you can have quite a nice life in comparison to the other capitals in the E.U."
Job markets in many southern European countries - once stifled by the euro-zone debt crisis - are also looking healthier.
Many of the most troubled parts of southern Europe a decade ago, including Spain, Portugal and Greece, are now anticipating some of the fastest growth rates in the coming years.
"Job market opportunities have definitely improved in southern Europe," said Riccardo Marcelli Fabiani, economist at Oxford Economics. He said that visa requirements after Brexit are often "insurmountable" for the unskilled and also discourage skilled workers.
The outlook in the U.K. meanwhile has deteriorated. While unemployment remains low, growth is anemic and long-term real wages stagnant.
"The U.K. economy is not doing particularly well," said Bukowski. "The most attractive jobs are now in the Netherlands and Germany rather than the U.K. People may still move, but they're probably not going to come to the U.K."