Overseas student and worker curbs will cost UK business £40bn, say official estimates

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The UK’s clampdown on international students and overseas skilled workers will cost business more than £40bn and provide no overall benefit to society, according to government estimates of the policies’ impact.

The regulatory impact assessments published on Friday come as Sir Keir Starmer’s Labour government has pressed ahead with the measures, which are designed to cut immigration and were first introduced by the Conservatives.

Changes to the rules for sponsoring visas for skilled workers, which took effect in April, will cost business £37.4bn over 10 years, according to the Home Office’s central estimate. This is largely because they are expected to pay much higher salaries in order to hire many of the same workers. 

A small fiscal saving from lower spending on public services will not offset this, resulting in a net economic cost to society of £26.5bn over the period. 

A ban on international students bringing family members with them when they study at UK universities is expected to cost the higher education sector almost £5bn in lost tuition fees and the Treasury almost £15bn in foregone tax revenues from students’ and dependants’ earnings.

Savings from lower spending on public services would not offset this, with the policy carrying a net cost to society of about £500mn over 10 years.

The impact assessments found that the overall effects of changes to sponsored work routes would be mildly positive, once a ban on care workers bringing family members was also taken into account.

Care workers bringing partners and children have been the biggest driver of higher net immigration since 2022, when they first became eligible for visas.

The impact assessments found there would be a big saving from the ban on dependants, based on the assumption that overseas workers would still fill vacancies and pay UK taxes but no longer bring children needing schooling and healthcare.

The rule changes were part of a package of reforms brought in by the previous Conservative government in response to a surge in inward migration, which hit a record high of 764,000 in 2022. 

Since becoming prime minister in July, Starmer has kept the reforms in place and pledged to cut immigration further over time, including in the recruitment of high-skilled workers.

Although he told businesses last week that he would not “chop off your legs” by cutting off visas overnight, Starmer warned that he would not tolerate employers relying on overseas hiring “year after year” rather than training UK apprentices. 

But business groups have warned tighter visa rules will damage the higher education sector, which is already facing a looming financial crisis, and worsen recruitment pressures in key areas of the economy.

The Home Office documents underlined that all its estimates were subject to big uncertainties about how employers and individuals would change their behaviour as a result of the new rules.

It said the overall impact on the public finances would be “small” spread over 10 years, and alternative scenarios showed it could be either positive or negative.

The impact assessments were based on information available before the rule changes took effect.

The latest figures published by the Home Office on visa applications suggest that inflows of skilled workers have been roughly stable since the changes were introduced, but there has been a much sharper drop than initially expected in arrivals of care workers.

The Home Office said the government was “clear that net migration must come down and that immigration should not be used as an alternative to tackling skills shortages here in the UK”.

The impact assessments showed legal migration was set to fall and the government would go further in linking immigration and skills systems to “end the over-reliance on international recruitment”, the department added.