Excluding lower-paid immigrant labour could hurt UK’s tech sector
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The UK’s new point-based immigration system could make it harder to fill lower-skilled tech vacancies and make employing engineers more expensive, as well as stressing technology start-ups.
Next year the UK leaves the EU, giving the government another chance to change its immigration system. Immigration, top of the agenda during the 2016 referendum, has slipped down during the pandemic as polling showed public concern over healthcare double that over immigration.
Now, it’s back. The share of people who think the government is handling the issue of immigration poorly jumped from 44 per cent in March to 74 per cent in August, according to pollster YouGov.
The UK’s post-Brexit Points-Based System (PBS) will be similar to the Australian one in principle but very different in detail. There are some benefits in the new system, especially for the engineering industry, proponents argue. They say it makes it easier, for instance, to source technical high-skilled workers from abroad. They can be hard to source domestically and may be more difficult to train. “From next year, the minimum salary and skill level will be lower, which will benefit the tech industry,” one UK immigration law expert told E&T.
The shortage occupation list (SOL) includes jobs that few UK nationals can fill. The list is heavily biased towards STEM occupations and contains technical and engineering roles like mechanical, electrical, electronic, design and development engineers. The updated list for the PBS is still in consultation but STEM is where the largest skill gaps are, labour experts argue, so STEM concessions are likely to remain.
Angharad Aspinall, an employment and immigration lawyer at Capital Law, says the new PBS will have some welcome improvements. It takes the minimum salary threshold from £30,000 down to £25,600, or even to £20,480 for STEM roles. The minimum skills level will also drop, from degree level to A level or equivalent. It benefits roles like quality control and planning engineers, which have an average wage of around £28,500 per annum: it means that from 1 January 2021 they will meet both the salary and skills criteria, Aspinall says.
However, up until this year UK employers can hire EU nationals without having to worry about meeting any salary threshold or minimum skill level. That freedom of movement ends in the new year and that’s a concern, says Aspinall, especially for entry-level jobs.
E&T compared domestic market rates for staff to fill specific technical roles and consulted average salaries on job site Glassdoor, comparing those with salary thresholds for engineering jobs on the occupation shortage list. The results show that entry-level roles will be hard to fill from abroad. For example, while Glassdoor data suggests that the UK-wide average salary for civil engineers is at £32,695, it also shows salaries can start from £17,000 at entry level – much lower than the new entrant threshold of £25,600, and lower even than the minimum salary of £20,480 for STEM roles.
“We might get to a point where the government realises we need people to fill lower-wage tech jobs but settled workers don’t want to do them and without these [semi-skilled] roles, we are not going to be able to progress,” says Aspinall.
The UK’s tech industry was growing at a rate 2.6 times faster than the UK economy before the pandemic, according to TechNation, and lobbying group TechUK is convinced the post-pandemic economic recovery will be led by technology. “We’ve got a government that is incredibly tech positive. We’re expecting a digital strategy in the 2020s which is all about growth, not just growth in the digital economy, but how tech can power growth right across the whole economy,” a TechUK spokesperson says.
While many tech-sector roles are high-salary jobs, the skill shortage affects all part of the tech and engineering sector. Nine-in-ten tech employers believe there is an industry-wide skills shortage at all levels, including the at the all-important lower-wage end. Cases where curbing low-wage immigrant labour hurt progress may not be immediately apparent, but Vinous Ali from TechUK gives one example. The government is set to roll-out a connectivity plan with ambitious targets for implementing high-speed fibre networks.
The targets, which were set in 2018, aim at 15 million premises connected to full fibre by 2025, “with coverage across all parts of the country by 2033 and the majority of the population will have 5G coverage by 2027”. This will require a lot of low-paid technical labour, Ali says, adding: “The engineers who will lay the cables and make it happen don’t meet the threshold set out by the government.”
Low-paid jobs also include those that can be easily automated. Low-skilled workers are more at risk from displacement by robots than high-skilled workers, market research has found. For Great Britain, around 30 per cent of potential jobs are at high risk of automation, according to a recent report by consultancy firm PwC. This is because countries like the UK and the US – with services-dominated economies but also relatively long tails of lower-skilled workers – could see intermediate levels of automation in the long run, the analysis by PwC found. In comparison, Germany’s share of automatable jobs is higher, at around 37 per cent.
The number of electrical and electronics assembly jobs – 94 per cent of them ‘automatable’ according to a report by Deloitte – fell by 60,000 since 2001. However, not all jobs can be automated and those that can take time and ready investment.
Nascent technology start-ups are especially fragile. A survey by consultancy Failory found team problems account for nearly one-fifth of start-up failures and one of those problems is lack of technical knowledge; 6 per cent fail purely because they can’t get access to software engineers. How vulnerable these tech jobs really are, many of them in small firms, is displayed by numbers from April, shortly after the pandemic hit. Tech hiring activity among the 100 top British tech firms dropped by 31 per cent, according to Adzuna and WorkinStartups.
When hiring activity picks up again, many firms may face a worsening skills shortage just when they need more people, and the PBS will only make it harder to fill those roles. Aspinall says the best examples are the types of roles which start off low-skilled, but can lead to more experienced and ultimately higher-paid roles such as tech apprenticeships, where the starting salary and skill level is unlikely to match the minimum skill or salary required.
TechUK’s Ali thinks the UK government will take a pragmatic approach. The legislation on the point-based system isn’t final yet and there could be further changes. “We’ve always had this issue, which inspired the shortage occupation lists in the first place,” she says. The government wants to make it generally “easier for employers to access migrant labour to fill vacancies in those areas of identified shortage”, according to its May 2020 SOL guidance document.
There is a welcome push to train labour, says the representative from TechUK: “The digital sector is one of the greatest users of apprenticeships.” Yet experts see no way to meet the technology and engineering skills shortages with home-grown talent alone. According to the Royal Academy of Engineering, we need nearly 200,000 new engineers and engineering technicians a year until 2022.
TechUK’s greatest worry is the long visa process; it still takes around 20 weeks to get one. At a time when digital skills are in extreme short supply across Europe, this time period could motivate many EU nationals to opt for alternative countries. A Spanish engineer may opt for an immediate job in France or Germany, for instance, to avoid the delays by the British visa process system.
What is certain is that next year the costs for UK-based firms taking on talent from abroad will escalate. Compared to Australia, France, Germany and Canada, Britain’s visa fees are significantly higher: it can cost a company six times as much to get an overseas worker a UK visa as it would to get one for someone relocating to their EU offices, and this is before we consider dependants and other associated costs, TechUK says.
For EU nationals starting work in 2021, the visa cost to UK firms will skyrocket from zero to around £8,400 for a five-year sponsored visa – for the main applicant only – or £9,500 if proposed increases to the Immigration Health Surcharge take effect. For smaller tech start-ups, this may prove too much.
The latest set of negotiations between EU and UK representatives keep hitting roadblocks. A no-deal Brexit is, again, looking increasingly likely. The last time an expert independent economic analysis, commissioned by the Mayor of London, Sadiq Khan, counted, a no-deal Brexit could trigger 92,000 fewer jobs in science and technology, and 43,000 fewer jobs in construction.
Another challenge is keeping the existing tech-savvy and high-skilled labour force from other EU countries in the UK. According to a KPMG survey, around half of the EU citizens already working in the UK’s information technology, engineering and manufacturing sectors expected to leave the UK or were considering doing so.
In conclusion, the government relenting on lowering the skills and salary threshold for foreign tech workers and offering concession may not be enough – neither for high-skilled jobs nor for lower-wage and entry roles.
“Wages are not a proxy for skill,” Ali points out. “It’s more about how to create a wider immigration system that is effective, quick, and easy to understand. On that point, we’re not there yet.”
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