Brexit and COVID: How the mass exodus of EU8 and EU2 citizens is reshaping London
The uncertainty of Brexit and COVID has led many EU8 and EU2 citizens to leave London in record numbers, which will have a profound impact on London.
To get the full picture of what is happening, it is important to know the history of EU8 and EU2 migration in the UK and how it impacted London.
In 2007, when Poland, Latvia, Slovenia and many other EU countries were granted EU free movement, millions of those citizens moved to the UK for better wages and higher quality of life.
This was later followed by Bulgaria and Romania in 2014 when they also were granted freedom of movement. The mass migration had a significant impact on London’s economy. Warehouses, hospitality and food manufacturing, and farming now have new hard-working and highly motivated workers to fill in the shortage of gaps in skills. But it is not just business but also catholic churches that benefited from the freedom of movement. In 2006, catholic churches were on the verge of collapsing but now have new young Eastern European Catholic priests and congregations to fill new life into the churches.
All of this changed when the UK voted to leave the EU in June 2016. After the vote, it was uncertain how Brexit would look and shape the UK, which led to certain EU citizens leaving the UK. As the UK became closer to reaching a withdrawal agreement with the EU, COVID-19 bought the world to a screeching halt, and countries across the globe were forced into a strict lockdown. The UK is one of the worst-hit countries in the world. The virus killed more than 127,000 in the UK and forced many businesses into bankruptcy. The pandemic is so grim that it plunged the country into its deepest recession in 300 years, according to the Finical Times.
All of this uncertainty led many EU workers to leave the UK, but some are particularly more than others. There have been many reports from different news outlets regarding the mass exodus of EU citizens. However, it does not specially say which bloc of countries. This report will answer dig a little deep for a better understanding of the data and who is leaving, and the impact it will have on London.
But before we get into the statistics, it is important to understand what countries make up the European Union and how they are categorised because the EU is a large area with a collection of many countries with different languages, cultures and economies. So, it is important to see which EU migrates are leaving.
EU14: These countries joined the EU before 2004, and they consist of Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, and Sweden.
EU8: These countries joined the EU in 2004, and they consist of the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia.
EU2: These were the last set of countries to join the EU. These countries are Bulgaria and Romania. They joined the EU in 2007, and 7 years later, on the 1st of January 2014, they were granted free movement across the entire EU.
The data source for this report will be the Office of National Statistics (ONS) Annual Population Survey (APS).
These datasets can be requested here: https://www.nomisweb.co.uk/
Figure 1: All EU nationals population in the UK
The first figure is the total number of EU citizens living in the UK from June 2013 to June 2021. As we can see from the figure, all EU nationals were on the rise, despite the outcome of the Brexit referendum in June 2016. The` EU8 population started to decrease one year after the referendum in June 2017. Regardless, during the COVID-19 pandemic, the population of EU8 and EU2 citizens dropped significantly, while EU14 increased.
Figure 2: Distribution of EU citizens in the UK
In Figure 2 above, we see that EU nationals are more likely to reside in London than in any part of the UK, and the largest drop of EU citizens is in London.
After the Brexit vote in June 2016, the EU14 increased until December 2017 when it slightly dropped and pick up again. From the Brexit vote to the just start of the Covid Pandemic (December 2019), the EU14 population climbed from 537,900 to 568,300, a 5.6% increase. And during the early stages of the pandemic, the population climbed from 568,300 to 601,600, a 5.8% increase. And then, during the pandemic, it slightly dropped with the population to 570,000, a 5.2% decrease in June 2021
The EU8 saw a sharp increase from December 2013 to December 2014. And December 2014 to December 2017, there were a small increase and decrease in population. The most significant drop came after December 2017 when the population went from 255,100 to 203,900 in December 2018. Overall, since the Brexit vote from June 2016 to June 2021, the population decreased by 20%.
The most striking is the population of EU2 nationals. The population continued to rise sharply in London despite the Brexit vote. The population increased from 125800 in June 2016 to 190400 in December 2019, a 40.8% increase, just before the COVID. And during the pandemic, nearly half of the population declined. The numbers went from 190,400 to 108,000, a 43.2% drop.
The population gap between EU8 and EU2 between London and other parts have the UK has been narrowed significantly.
Such a drop in the population of EU8 and EU2 citizens will have an impact on recruitment in the UK. Chris Slay, the owner of Acorn Recruitment which specializes in Eastern European workers, said job applications from EU2 and EU8 countries have “virtually disappeared”, and it negatively impacted his company’s ability to recruit.
“Most realize that they cannot get a job in the UK now unless they get visa support. Most of them do not have a clue on how to find an employer willing to give visa support, and most UK employers don’t have a clue about what they need to do to offer visa support” he said.
Chris Slay expressed his frustration with the whole Brexit process. He said Acorn Recruitment and other recruitment agencies have advocated to the British government that they should extend the period of the availability of EU workers by either six months or a year. This will give people and businesses a chance to properly adjust and plan for our future.
He added, “we did not know the fine details because the government issued it very late, so it was hard to plan for the future”.
Figure 3: Skills distribution by nationality
Figure 4 | Overqualification by nationality
When we break down the skills in figure 3, the EU8 and EU2 are least likely to work in high-skilled jobs, while EU14 and India are more likely to work in high-skilled jobs. EU8 and EU2, along with Pakistan and other South Asia, are more likely to work in low-skilled.
If we look at figure 4, we see that EU8 and EU2 workers are likely to be overqualified to work in low skilled jobs.
Figure 5 | Earnings of full-time employees by nationality
Figure 5 shows how much the earnings of different nationalities. The 25%, 50%, 75% percent bracket. When it comes to wages, EU8 and EU2 workers are more likely to work for lower wages than any other nationality. 75% of the entire population of EU8 and EU2 workers do not earn more than £32K to £29K. While EU14 75% do not earn more than £48K.
Figure 6: Breakdown of industry of employment
Figure 6 shows the clear breakdown of sectors migrant and UK workers are likely to work in. EU14 are more likely to work in education, health and social work, and professional & scientific. While EU8 and EU2 workers are likely to work in manufacturing, retail, construction, transport & storage, and the hospitality sector. These industries are the hardest hit. Chris Slay said that these industries did not plan for Brexit, and they continued as if they would not be any changes or make new adjustments.
He said the executives in those industries are currently in a position of uncertainty and confusion about future prospects. He added, “and in those industries, employers are always looking for ways to get lower costs for things, so I had some amusing conversations with employers who say’ yes, I am prepared to sponsor visas, but I want my workers to be self-employed as well. That is not going to happen”.
Chris Slay stressed that there will be serious complications when the country emerges out of furlough and the market opens.
Julian Jessop, economist and former HM Treasury Advisor, also agreed with Chris Slays concern about the complications that will arise when the markets open. “The bigger problem will come when the economy fully reopens, especially as a significant number of those workers have left the country over the last year”.
“It seems unlikely that some of these workers will return. This will exacerbate supply constraints and inflation pressures, especially in consumer-facing services, where pent-up demand is likely to be greatest, and in cities like London, which have recently depended heavily on migrant workers, particularly from the EU in general”, said Julian Jessop.
But Julian Jessop said that because the Brexit changes had happened when large parts of the economy were shut down due to COVID-19 has at least minimised the disruption because the furlough scheme kept them afloat.
“A relatively high proportion of those workers are employed in sectors like hospitality and tourism where there has been little recruitment anyway. This has provided a little more breathing space for some of the most vulnerable businesses to adjust”, he added.
When the markets open up, there will be skill shortages which will leave many businesses vulnerable. Jessop said that it will take some time for businesses to understand and adapt to the new rules “governing the relationship between the UK and the EU” and that “this applies in many areas, including cross-border trade in goods and services, as well as the rules on employment. So, it is very likely that, in the meanwhile, businesses will recruit foreign workers from non-EU nations to fill in the gaps”.
The most striking in Figure 6 is the high reliance of the construction industry on EU2 workers, with 17% of the population working in that particular industry, and it is more than double that of any other nationalities.
Professor Noble Francis said that, currently, there are no major issues with skill shortages because the construction remains “significantly below pre-Covid-19 levels”.
However, he said that as construction recovers that there will be skill shortages in London now that many EU2 citizens have left the capital. He also said the from 1st of January 2021, the “UK has a new employer-led points-based immigration system”, which does not favour the construction industry because “activity is project-based, rather than on permanent contract”.
Francis confirmed that 40% of workers in the construction industry are self-employed and 86% of construction employment is in Small and Medium-sized Enterprises (SMEs) that do not have the resource to sponsor workers from outside the UK.
“The likelihood is that in the short-term construction in London recovers, higher wages in London will attract workers from other surrounding regions of the UK, but this increases wage inflation and construction costs”, he added.
In the long-term, there would be serious additional issues regarding construction workers’ age, he confirmed. “The spike in the age demographic of the UK-born construction workforce is in the 50–65 age range, so that means that UK construction will be losing around 500,000 UK-born workers”.
He added that this would cause a serious lack of supply of construction workers, and the higher costs will motivate increased investment in automation of the industry and introduce modern, cheaper methods of construction, which will lead to higher productivity and lower labour cost.
But Noble warned that once part of the construction industry becomes automated, these jobs will be lost forever.
Brexit and COVID will have a major consequence on London. Many businesses did not plan for Brexit, and COVID led EU8 and EU2 nationals to leave the country on a mass scale. Not only will this impact the capital economy but also change the culture of London, with many churches closing because of the lack of worshipers. New Hindu temples and Mosques will pop up throughout London as more immigrations will flow in from those countries to fill in the skill shortages while businesses adjust to the new point-based immigrations for EU2 and EU8 citizens. London has, and has always, been changing, and this is a new chapter for the capital.