This month’s debate among the FT City Network focuses on the direction of Brexit thinking and the importance of immigration to the future of the City of London. We asked the network — a forum of more than 50 of the City’s most senior financiers — the following questions.
With Theresa May having apparently turned away from the idea of a points-based system for immigration controls, what kind of approach would you like to see? What kind of reforms could square the referendum outcome with the needs of the City to hire the best possible staff? Below is a full transcript of the responses.
Johannes Huth, KKR
People are at the heart of the financial service industry and it is therefore a key question if we are able to attract and retain the best possible talents, including non-UK nationals. Will talented, mobile, non-UK individuals still be willing to make long-term commitment to work and raise their families in UK? Today, many of those talents come to London from all over the world, including Europe. The BVCA estimates that about 30 per cent of the 10,000 or so people working in the private equity/venture capital industry are non-UK nationals.
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It is no different for the firm that I represent. Today, we have more than 220 talented people with 38 new joiners in 2015 alone, representing over 25 nationalities, with the majority being non-UK nationals.
The longer the government waits to provide clear assurances that we are not just open for business but open for talented people, the bigger the potential damage. This issue is front of people’s mind today. They want clarity and certainty for themselves and their families.
Given the importance of the financial sector, it should be a matter of the most immediate and important concern for the government and its opposition to provide assurances that EU citizens, who are already employed in our industry and exercise their Treaty rights, and aspiring EU newcomers with a sponsor and a job offer, should have no headaches about their UK residence status.
Jean-Pierre Mustier, UniCredit
With Prime Minister May being committed to a reduction in immigration, but apparently turning away from the idea of a points-based system for immigration controls, it is important that an alternative system is designed and implemented in due course, rather than what could become the default option of an annual cap on EU immigration. The UK financial services industry always has relied on a deep, highly skilled, highly specialised and multinational pool of talent. In this globalised and highly competitive industry, where workers are highly mobile, the welcoming of qualified foreign labour is critical.
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I would hope the UK will move to a two-pronged approach in its immigration policy. First, for the financial industry as a whole, it is important to acknowledge that the sector is undergoing sizeable reforms, which will almost certainly lead to a considerable drop in total employment in coming years. With respect to UK employment specifically, the likely decline in net hiring would be more pronounced if the financial “passporting” rights were to be lost. As hiring slows, there is a real danger that the age pyramid becomes distorted by hiring too few graduates. It’s important, therefore, that UK universities maintain strong degrees in financial services to train the next generation (both British and non-British) and that government immigration policy provides arrangements for non-British graduates to seek job opportunities for a period after their degrees have finished.
Second, the present system for non-EU citizens (which is quite relaxed for highly skilled individuals who already have a job offer, and open for those earning more than £150,000) is not an ideal model for the future if it’ll apply to all immigrants. In particular, it would be helpful to have a system with no caps on intercompany transfers and immigration of highly skilled people earning less than £150,000.
Rhydian Lewis, RateSetter
The UK has a long history of being open to skilled, hardworking people — this is a strength and I’d like to see it continue. Indeed, as workers become ever more mobile, it is important that the UK continues to attract and hold on to the most talented and driven people from not only the EU, but around the world. I am agnostic as to the precise system used to secure this, but the desirable outcome is a no-brainer.
While the peer-to-peer lending industry is relatively young, it already boasts a very diverse workforce — highly skilled people from EU countries are an integral part of the innovation and growth of this sector. For example, one in five employees at RateSetter is from an EU country outside the UK. I’d like to see the government provide certainty that EU citizens already working and contributing to UK businesses will be able to continue to do so. The UK has a lead in fintech and any uncertainty on the subject of immigration risks seeing that lead drift elsewhere.
Samir Desai, Funding Circle
The UK has always been, and will continue to be, a world-class country with world-class resources and assets, including talent, innovation, legal framework and a supportive government. In the words of Tech City, we are a financial services superpower and global tech hub. Free movement of talent post-EU referendum is a key concern to start-ups and scale ups alike. Half of the engineering team at Funding Circle are EU nationals. We therefore hope the introduction of the Tech Nation Visa Scheme means our doors will remain open to the brightest and best — in addition to the Entrepreneurs’ Visa and the Tier 2 general skills route.
Fintech is about using technology to improve financial services and create value for consumers, and this hasn’t changed since the decision to leave the EU. The UK has never suffered from a lack of entrepreneurial spirit and I remain confident that the technology community will continue to innovate in order to better serve customers.
Mike Rake, BT
A few points:
1. The Leave campaign successfully conflated the different issues of historical immigration, migration and refugees.
2. There is a widespread skills shortage and a demographic issue to which migration/immigration have been part of the solution.
3. In reality, many businesses were looking for more immigration, particularly in relation to engineering etc from outside the EU.
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4. The net result of the above is that it is clear that the overwhelming majority of migrants that we have currently are necessary to our economy, be it in leisure, tourism, the National Health Service, engineering businesses and financial services etc.
5. The first step should be to confirm that EU citizens currently resident in the UK and in employment will be allowed to stay. This is an essential step to reduce the real uncertainty that is out there and is affecting recruitment and retention. The residency of EU nationals should not be used as a bargaining tool.
6. We should be very clear that we are open to the immigrants that we need from within and outside the EU and there needs to be a sensible (speedy) process for skilled and unskilled requirements across all sectors of our economy.
7. None of the above is not to say that we should not address the shortage of housing and hospitals in some areas where many migrants have settled or to continue to do more to improve the skill levels of our young people.
8. Lastly, if Britain is to succeed it simply must remain open in every sense, economically and culturally and welcome those skills that we need.
Lady Barbara Judge, IoD
Finance is, by its nature, an international business, which I know from first-hand experience having worked as a banker in America and Hong Kong, before finally settling in Britain. Accordingly, after Brexit, it will be more important than ever for London to stay competitive with cities like New York, Singapore, Hong Kong and Tokyo. This means being able to bring in highly skilled individuals at all levels with as little friction and difficulty as possible. The chancellor has tried to reassure the City that top talent will be able to move easily, but firms do not just have skills gaps among their senior staff. They need promising juniors as well. Over the last few years government policy has made it much harder for international students to come here, and to stay once they have finished their studies. Most people do not view students as migrants, so taking them out of the net migration target would be an easy step for the government to take.
If people can see the taxes of city workers going to local services (particularly outside London), the case for the positive impact of immigration is easier to make
– Lady Barbara Judge, IoD
Of course business understands the political pressures on this issue, and although migrants are a net benefit to the economy, not enough has been done to make this obvious. One idea would be a migration impact fund, paid for through the taxes of migrants, targeted at areas of the country which are experiencing pressure on schools or housing due to a sudden rise in arrivals. If people can see the taxes of city workers going to local services (particularly outside London), the case for the positive impact of immigration is easier to make.
David Morgan, JC Flowers
Theresa May is mistaken with her comments on the Australian points-based immigration system. The system does not result in the government losing control over immigration numbers to employers.
Australia has had a very high rate of net immigration. It enjoys bipartisan support and broad community acceptance. The points-based system has been an important part of that support and acceptance. It could be claimed credibly to the Australian electorate that the Australian government has control over both quantity and quality of immigration.
It is to be hoped that the UK government take a closer look at a points-based approach.
Simon Walker (ex-IoD)
The debate on immigration in Britain is in a sorry state. The Brexit vote was driven by the feeling that politicians had lost control of immigration. No one is happy with the current system — the public rightly object that record keeping is patchy and the border force is underfunded, while businesses complain the visa system is hopelessly bureaucratic. Something needs to change and this seems the right time.
The first step must be to drop any arbitrary net migration target, and instead design a new system which fits the needs of post-Brexit Britain. Rather than making up policy on the hoof, I would like to see the government conduct a wholesale immigration review before making final decisions.
Sir Win Bischoff, JPMorgan/FRC
The government quite correctly characterises the UK as being an open economy, and is desirous of further and increased investment. It would be ironic and harmful to that policy if “open” means “closed” to skills necessary to realising the benefits of such investment.
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A way will need to be found to linking investment in and into the UK to aspects of skilled immigration. The anxiety of the citizen over immigration will need to be balanced — and explained — by the benefits that investment and any concomitant maintenance or influx of skills bring to society and the economy.
Thus there is a strong case to be made for those “in work” at 23 June to be grandfathered and to remain in the UK, in return for those UK citizens living legitimately in the EU to continue to do so.
Thirdly we should be much more discerning, indeed tough, on what might be called “economic migration”, those seeking what they perceive as a better life in this country but without the skills so demonstrably needed.
Brenda Trenowden, 30% Club
I agree with many of the points that have been made already, particularly that finance is an international business by nature and that people are at the heart of the financial services industry. Like Barbara, throughout my banking career I have worked in a number of different countries around the world and those experiences have strengthened my skills as a banker. I have been fortunate to be able to work in these financial centres with my UK passport.
As one of the leading global financial centres, London will need to maintain the ability to attract and employ the best talent in financial services from all over the world and also to allow UK citizens to gain valuable experience from working in other financial centres. This must be a top priority for the government alongside passporting if we want to retain our leading position.
Our ANZ economist also reminds me that 7 per cent of the UK workforce is from the EU and that we currently have 4 per cent unemployment. This is largely structural which means that we don’t have the skill sets to fill the jobs; if we lose the EU citizens, we don’t have the people to do the work. Therefore, the government must negotiate a deal which includes grandfathering those who are already here as well as UK nationals in Europe, and a very clear system to continue to allow foreign nationals — both students and highly-skilled employees to come and work in the UK without making it too bureaucratic.
To state the obvious, it is incredible that we are debating this issue now after the vote for Brexit without any clear plan in sight. I can’t imagine any large company whose board would vote for a major change in strategy without a credible implementation plan behind it.
Paul Drechsler, CBI
I have every confidence that City Network members will be full of ideas on reforms and what we need. I would like to step back from the question.
Diversity is one of the greatest strengths of the UK, including diversity of talent, perspectives and ideas. The UK has some of the most exciting and diverse cities in the world — from London to Manchester. That diversity is a vital ingredient for UK success in many areas including innovation, technology, financial services and public services.
The time for an honest conversation about the role and value of immigrants — skilled and unskilled — to the UK’s future growth and prosperity is long overdue
– Paul Drechsler, CBI
However, leadership across government, the public sector and the private sector has failed, significantly to inform and explain the role and value of immigration to the UK. At the same time successive governments have failed to invest in infrastructure to meet the nation’s needs; housing, schools, hospitals and more.
Is it any wonder immigration was the principal driver of a vote to leave the EU as citizens saw the root cause of so many of these issues as uncontrolled immigration? So we need to acknowledge clearly and loudly the concerns of so many people right across the UK. The time for an honest conversation about the role and value of immigrants — skilled and unskilled — to the UK’s future growth and prosperity is long overdue.
While this may be a political leadership responsibility the business community must engage respectfully. So any response on what to do to meet our business needs that does not acknowledge and consider how to address people’s concerns is doomed to fail.
There is no solution to the current immigration concerns if those in government do not lead honest conversations urgently.
Whatever the final outcome is, growth and jobs across the country will be best supported by a system that supports companies who need to hire from abroad, either because they are global firms or because they struggle to fill skills gaps at home. And better training for our UK workforce will need to be part of that. But, overall, we need to focus on what we are trying to achieve and what we are trying to control.
This is not just a private sector or corporate issue; many of our vital public services depend on, and benefit greatly from access to immigrants. It’s time to start an honest conversation and recognise the value of those who come here to work, pay tax and contribute to the country.
Robert Swannell, M&S
And why not connect the promised industrial strategy with a joined-up people and migration strategy? That could usefully cover historic effects of migration (including economic analysis of tax received less benefits paid/received), skills requirements/shortages and also what tertiary education should be encouraged at universities and FE colleges to meet these shortages, either through UK citizens or migrants.
It would be a welcome change to have a debate based on a plan and factual analysis, in marked contrast to the vote on Brexit where there was no clear analysis of Brexit because it wasn’t HM government policy and there was no known Brexit blueprint. I just hope that when the final Brexit plan is laid out with whatever trade and migration agreements are negotiated with the EU, we are given a proper factual analysis and parliament can debate and vote on a properly assessed and integrated plan.
Alison Carnwath, Land Securities
There is a lack of understanding and hence poor communication about the whole subject of immigration and its value to London and elsewhere in the UK.
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As a country and a government we seem to have centred the debate around numbers — gross and net immigration and not around outcomes. We have focused on flows and then tried unsuccessfully to divide the numbers again into economic migrants and skilled migrants. We are attaching labels too readily. We are talking about friends colleagues and future colleagues and friends. We are talking about people who can and will make a difference to our businesses and communities — mostly positive and sometimes challenging. We have had always had a portion of the population who were anxious about job losses or were xenophobic. Job losses will be driven by technology not immigration.
The benefit of a diverse workforce is what most of us preach these days in business. It has taken large business a while to practise this. We need to advocate the benefits more and loudly.
We must not let this matter run away from us — the City has always needed immigration and that will continue. Over to the Rt Hon Greg Clark and the Rt Hon Amber Rudd to figure out and advise the PM wisely.
Edward Bonham Carter, Jupiter
“Reculer pour mieux sauter”, as some Brits are prone to say. The EU may perceive that it is in their interests to constrain some of the drivers of success to the United Kingdom as a dominant financial player in order to attempt to gain market share. The political pressures on our government to be seen to be limiting immigration will also limit market access. The direction of negotiations is highly uncertain given the shifting political sands, especially in Europe.