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UK Is In A Post-Brexit "Adjustment Shock" And Business And Government Can't Agree A Way Out

Prime Minister Rishi Sunak and Director General of the CBI Tony Danker at the CBI conference in Birmingham(Alamy)

4 min read

A leading economist has said the UK is going through an “adjustment shock” on migration and the labour market after Brexit, but businesses and Number 10 seem to have different ideas on the best way forward.

Prime Minister Rishi Sunak told business leaders at the Confederation of British Industries (CBI) Conference on Monday that he is “unequivocal” that Britain will not negotiate a relationship with Europe that leaves it dependent on EU rules, such as liberalised immigration, that could alleviate workforce issues, in exchange for more favourable trade terms. 

Minutes earlier CBI director general Tony Danker warned in his own speech to the conference that the UK has “vast” labour shortages and called for changes to the visa system to help fix it, following the end of freedom of movement. 

Jill Rutter, a senior fellow at the Institute for Government explained that firms are now adjusting to the new post-Brexit market that Sunak continues to promise will help deliver growth for businesses. 

She told PoliticsHome that in the lead-up to Brexit, the promises were that the UK would change its “migration offer to get in people who bring qualifications, and high-earing potential to the UK economy, but we will shut off this supply of low paid labour,” a sentiment underlined by Sunak today. 

The thinking then was that businesses could readjust their offerings if they found themselves with staffing changes. 

“If you can’t get enough people to work [...] at the national living wage, then let the market work and make it much more attractive to work there than at the supermarket or a warehouse," she explained. 

“The problem is that these are very cash strapped sectors.” 

Businesses are now having to look at whether their services become more expensive and face the knock-on consequences of a fragile economy, or whether they will need to shut down sites. 

“But that’s the sort of adjustment shock we’re going through now,” Rutter added 

In his speech today, Danker argued that immigration is “the only thing that’s increased the potential growth of our economy since March”. 

He believed that the country does not “have the people we need, nor do we have the productivity” and called for changes to the existing rules to help growth. 

“Let’s be honest with people, our labour shortages are vast,” he told the event in Birmingham.

“We have lost hundreds of thousands of people to economic inactivity post Covid. And anyone who thinks they’ll be back any day now – with the NHS under this kind of pressure – is kidding themselves. 

“Secondly, we don’t have enough Brits to go round for the vacancies that exist, and there’s a skills mismatch in any case.”

He added: “Let’s have economic migration in the areas where we aren’t going to get the people and skills at home anytime soon. In return, let’s make those visas fixed term. And let’s agree a skills policy that works to fill these roles from the UK in the medium term”. 

This weekend, The Sunday Times reported that senior government sources were considering pushing for a Swiss-style deal for the UK and Europe post-Brexit. Ministers have said they do not recognise the proposition. 

Switzerland is not a member of the EU, but it has a number of deals in place which mean that is has access to the single market for a number of its industries, and has an agreement on freedom of movement.

Asked about the issue after he spoke at the CBI conference on Monday morning, Sunak told delegates: “On trade, let me be unequivocal about this. Under my leadership, the United Kingdom will not pursue any relationship with Europe that relies on alignment with EU laws.

“Now, I voted for Brexit. I believe in Brexit and I know that Brexit can deliver, and is already delivering, enormous benefits and opportunities for the country – migration being an immediate one, where we have proper control of our borders and are able to have a conversation with our country about the type of migration that we want and need.”


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