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In the last decade, the UK's population has risen at its fastest pace since the 1960s. And no, it's not because the Brits are suddenly getting broody. Fertility is actually falling. It's because immigration has surged to record highs. Which is funny. Only 10 years ago, millions of Brits voted for Brexit specifically to reduce immigration. So then why has the exact opposite happened? The obvious explanation is that Britain has an aging population and persistent labor shortages. Employers need workers, so the government made it easier to bring them in. But these labor gaps deserve questioning because
paradoxically the UK has a staggering 1 million young people who aren't in work, education, or training. This sounds less like a labor shortage and more like a broken system where the economy is failing to allocate spare labor capacity into the sectors that demand them. But the migration conundrum gets even stranger because while workers are coming in, there's a growing population of wealthy entrepreneurs who for a host of reasons are leaving. And this comes with its own set of potentially crippling problems. Immigration debates tend to be emotionally charged and focus on national identity, cultural integration, and fairness. The cold, hard economics tends to get sidelined. So, as always, we have some questions to
answer. If Brexit was meant to reduce immigration, why has it rapidly increased instead? Is the UK relying on immigration as a quick and cheap solution to deeper problems with skills, wages, and productivity? And finally, how economically damaging is the immigration of wealthy British nationals? The UK has long been a financial hub, birthplace of the industrial revolution. It was there where investment truly returned at an exponential rate. Fortunately, finance has become more accessible since those days. But finding the time to properly allocate and manage your hard-earned wealth remains difficult when we have such busy lives.
That's where Trading 212 comes in. Trading 212 is making it far easier to invest and automate building wealth for regular folk. Its app offers investment tools that are pretty impressive. For example, with automatic asset allocation, you can diversify your risk with ease and automatically reinvest dividends. With a few taps, you can set up automatic investing using a direct debit, so a portion of your monthly income gets invested in a systematic calculated manner. And if different rates of returns unbalance your portfolio, Trading 212 can rebalance it for you. This is a feature previously only available for high netw worth individuals at investment banks. Trading
212 also offers brokerage accounts with competitive interest rates. So save time and optimize your portfolio all in one place with Trading 212. Just know when investing, your capital is at risk. This is not investment advice or portfolio management. And since the folk over there love us so much, they're offering us all a random free fractional share worth up to €100. Just use the promo code EE after signing up and depositing on the platform. UK population growth has accelerated. From 1971 to 2000, the average annual growth rate stood at 0.18%, but from 2001 to the present day, it averaged 0.66%.
This has recently caught headlines following backto-back years of over 1% growth, representing the highest level of population increase since the late 1940s. The difference is that this time it wasn't because of a baby boom. It has been driven almost exclusively by net migration. That is the total number of long-term arrivals minus the number of long-term departures. Since the Brexit referendum in 2016, when swavthes of British people voted to leave on the premise of reducing immigration, net immigration has totaled over 3 million people. So, did Brexit somehow open the borders by accident? Not exactly. What really happened was that in 2021, a single pointsbased system was introduced to judge EU and
non-EU citizens by the same criteria for the first time. On its own, that's not obviously a recipe for more migration. For EU citizens, it was actually way harder to move to the UK since they were no longer allowed to move to the UK visa-free. And it showed in the data. Since the Brexit referendum, EU immigration to the UK has consistently declined, and from 2022, there's been more EU citizens leaving the UK than have been entering. But EU citizens were the exception. The new pointsbased system allowed the UK government to have more control over their own migration policy. With this, they relaxed the rules and opened new migration pathways, which made it easier for non-EU citizens to migrate. Now,
you're probably wondering, why did they relax the rules and open new pathways? Well, we can answer this by honing in on three types of migration: educational migration, labor migration, and humanitarian migration. In the UK education sector, and for UK labor markets, immigration was good for business. In 2021-22, the UK economy was in a rough patch, recovering from the pandemic and facing the highest levels of inflation since the 1970s. Incentives existed to increase immigration. In higher education, UK universities dramatically expanded their sponsorship of student visas. International demand for British universities is strong, making higher education one of the UK's largest exports. But in 2021, British universities were under severe financial
pressure due to cost inflation. cost inflation that they could not pass on to domestic students because there was a price cap on tuition fees set at £9,250 a year. But here's the catch. This price cap does not exist for international students. Given the strong international demand, they are charged far more and are a lucrative revenue source for the sector. So when cost inflation puts the sector under increased financial pressure, expanding international recruitment becomes the obvious solution. And with the post-rexit study visas allowing 2 years of work in the UK post-graduation, the UK government made the offer even more attractive for families around the world who could afford the high fees. At the peak in
2022, 484,000 international students migrated to the UK. That's an 80% increase compared to 2019 just before the post-rexit immigration system had been implemented. So incentives in the UK higher education sector explain a large chunk of the increase in UK immigration. But what else? Well, in many UK labor markets, there were severe shortages. In particular, the health and care sector was in a bad spot. Britain's aging population was already increasing demand for healthare and social care workers. CO then added treatment backlogs, long-term sickness, and severe pressure on existing staff, widening shortages. The government responded again by relaxing health and care visa rules. Care workers became eligible for
the visa in 2022 for the first time. The number of health and care visas granted nearly tripled in a year from 47,000 to 146,000 by 2023. Labor shortages grew in other key sectors, too. In construction, there were 38,000 vacancies a month. Wholesale and retail job adverts were 74% above prepandemic levels. And in farming, the labor shortage was acute enough that over 60 million pounds worth of fruit and veg rotted in the fields. In total, vacancies across the economy hit record highs in 2022. Naturally, this led to more work visas being issued across the economy. But direct work visas only
partly explained the increase in immigration. For many routes, it was possible for workers and students to bring their dependents like children or spouses. This contributed significantly to the overall figures. For example, there were actually more dependent visas issued to health and care workers than there were main applicants in 2023. Dependent visas were also granted for many students too. On the whole, student and work-related visas and their dependent accounted for 70% of total immigration during this time. But relaxing immigration rules wasn't all about economics. Humanitarian causes also arose. Beijing's political crackdown in Hong Kong, a former British territory, the US withdrawal from
Afghanistan, and of course, Russia's invasion of Ukraine, all created refugees fleeing persecution or war. The UK government created pathways to help these people on a moral basis. They were exceptional responses to exceptional events. Lastly, there was a sharp increase in asylum seekers and irregular migration via small boat crossings of the English Channel from France. Despite occupying a large portion of the political debate, this type of immigration only makes up around 15% of total immigration. All these factors combined resulted in the highest level of UK net migration ever recorded in 2023 at 944,000. In total, 19% of the UK population is foreignb born, which despite recent influxes, is actually a fairly average
level when compared against other OECD countries. So, no, Brexit didn't cause increased immigration in the UK. Brexit gave the UK government control of its own immigration policy, which it used to relax rules to address the financial strain of UK universities, emerging labor shortages, and humanitarian crises. But this leaves us with a deeper question. Because we now know that labor shortages led to more immigration. But why do these labor shortages exist in the first place? The word shortage makes it sound like Britain simply ran out of workers. Like one day the economy opened the cupboard, found nothing inside, and had to rush to order more labor on next day delivery. That's obviously an oversimplification.
Britain has labor shortages, yes, but it also has millions of working age people outside the labor force and a growing number of young people not in employment, education, or training. So, is immigration filling unavoidable shortages? Or is it a short-term fix that allows Britain to avoid fixing deeper allocative problems regarding skills, wages, and productivity? First, let's make one thing clear. Immigration has brought real economic benefits to the UK economy. Immigrants increase the size of the labor force, reducing the dependency ratio. The dependency ratio measures how many people aren't working for every person who is working. It's roughly calculated by adding the total population of children and retirees,
then dividing it by the working age population. The lower the value is, the more taxpayers there are to fund pensions, healthare, and other public services, which eases fiscal pressure. Since most immigrants are of working age, the UK's Office for Budget Responsibility, OBR, found that the average migrant is a net fiscal contributor to the UK economy, paying more tax than they cost through public services. This is why studies show that higher net migration actually leads to marginally less government borrowing and therefore lower national debt. Migration also increases consumption and many high skill entrepreneurs come specifically to the UK to access finance, hire talent and invest. As mentioned, international students support a large
higher education sector and they increase labor market flexibility by filling in shortages. This all boosts GDP, but the overall impact is slightly blurriier because while immigration has increased UK GDP, studies show it doesn't seem to have increased the GDP per capita. Increased demand for housing, a sector with relatively inelastic supply, has helped to push up prices, especially in the rental market. Good for landlords, not so good for renters. And there is some evidence that low-skll migration reduces the incentive to invest in machinery and automation, negatively affecting productivity growth. Clearly, it's a messy picture which requires nuance. But
one of the areas where high immigration may be contributing to a growing issue in the UK is skills development. I say this because it's a massive problem in the UK right now. There are 1 million people between the ages of 16 and 24 who are not in education, employment or training, otherwise known as needs. This represents 12.8% of all people in this age group, which is a higher proportion than any country in the European Union except Romania. Clearly, Britain has jobs that need doing and people who need opportunities. But the two are not connecting very well. And no, the point here isn't that immigrants are taking British jobs. It's that in a free labor market, businesses will hire who is best
qualified, experienced, and willing for the job, which is fair enough. And workers from lower income economies are incentivized to migrate for a higher salary. This plentiful supply of experienced labor makes international recruitment easy and much quicker compared to large-scale domestic workforce planning. The result is that domestic spare capacity doesn't get developed and deployed. Not only does this lead to a lost generation of disillusioned youth, but it also leaves key sectors of the economy reliant on international labor. And reliance on international labor can be a problem because they are more likely to leave in a downturn or shock as seen following Brexit and then again during the pandemic. It increases the
vulnerability of key sectors like healthare for instance. As global demand for healthcare workers increases due to global economic growth and aging populations. International labor are coming across increasingly attractive alternatives that may pull them away from the UK. Workforce reliance on immigration is no secret. The UK's National Health Service, the country's largest single employer, itself acknowledges it is overly dependent on international migration to meet the country's demand for healthare. Just look at this graph. The yellow line shows the proportion of vacancies in the UK that are due to skills shortages, and the blue line shows the number of work visas approved. When skills-based vacancies go up, more work visas are granted to fill the roles in the
immediate year or two after. There's a strong lagging relationship. This helps maintain supply of key services in the short term, but it negates the long-term need to train, upskill, or reskill spare labor capacity in the workforce. It's like using painkillers to treat a medical condition. Paracetamol is great at stopping the immediate pain, but in the long term, it's not addressing the root cause of the issue. And pretending it does can actually make things worse as it reduces the motivation to take substantive action to properly address the root problem. Now, this is not to say that if labor shortages stayed large and for long enough, then all 1 million young needs would eventually be trained
up and put in jobs. A lot of them face other challenges with mental health, long-term sickness, disabilities, and caring responsibilities. On top of that, AI is reducing the number of entry-level roles available. But a lack of opportunities for skills development and support for transitioning into work is certainly making the total figure of young needs higher than it should be. In a recent survey by the Chartered Institute for Professional Development, 35% of employers who hire migrant workers found it difficult to find UKorn workers with adequate technical skills. And 29% said that migrants have technical skills and qualifications that are hard to find. But the issue isn't entirely about gaps in skills
development. Working in the care sector, farming, hospitality, and construction is no joke. They're often physically demanding, low paid with irregular working patterns and limited progression. Employers often can't find domestic workers for such jobs, at least not at the current wage, conditions, and career prospects offered. Again, this is where immigration becomes incredibly useful because the reality is working age migrants often come from less developed countries with less opportunities, harsher labor standards, and worse pay. In other words, they are more willing to put up with these relatively tough working conditions by UK standards because it's still far better than what they can find at home. Let's take
someone from Kyrgyzstan for example. He can earn about £294,744 som working in agriculture at home, which is £2518 a year at current exchange rates. Or he can fly to the UK, work his butt off on a farm for 6 months during the busy season, and earn a minimum of £15,862. Then he can return home with the equivalent of 6 years of local agricultural wages, live like a local king, and enjoy a well-earned half a year off without needing to work at all. It's a very crude example, and this hypothetical gentleman will return home with less after paying for flights, their visa, rent, a smidgen of tax, and other costs. But it's still a massive wage arbitrage. For many people from low-income economies, these are
opportunities that are too good to pass up. Their opportunity cost, that is, the value of the next best alternative they're giving up is low. But for UK citizens, it's often an entirely different perspective. Low-skill, high physical effort jobs in hospitality, agriculture, care, or construction pay relatively little. The social status of the job is minimal and they often lack clear paths for career progression. For many people, they simply aren't jobs worthy of pursuing. And if you're in a privileged enough socio-economic position, you don't have to. In UK construction, this is brutally obvious. The sector needs hundreds of thousands of extra workers. But despite the government increasing financial support for apprenticeships,
uptake has still dropped 16%. The incentives simply aren't strong enough, and it's resulted in allocative inefficiency in the labor market. Most young people would rather stay unemployed and keep applying for jobs in more favorable sectors than take a funded apprenticeship in sectors that are desperate for workers. Either that or go to university, which still attracts the majority despite it costing tens of thousands of pounds in debt, despite there being a well-known overupp of graduates, and despite there being declining lifetime income premiums for this route. In response to all this, the UK government has introduced a youth guarantee, increasing funding for apprenticeships, entry- level jobs, workplacements, and sector specific
training pipelines to move young needs into employment. But it remains to be seen whether this meets the scale of the challenge. The UK's neat problem feeds into a larger subject, the subject of UK economic decline. According to Google search analytics, searches on this topic have exploded in the past 12 months. There are genuine reasons to support this notion. You ready? economic stagnation, chronically low productivity growth, fiscally constrained public finances, local councils on the brink of bankruptcy, notoriously high energy prices, underperforming utility services, delayed and overbudget infrastructure projects, high taxes, rising rates of theft, unprecedented political turnover, and downing street,
and a frustratingly complex system of compliance and regulation are all touted as signs that the UK has, to put it lightly, left much to be desired. But out of all these concerns, the reports that wealthy and high-income individuals are leaving in droves may be the most potent and revealing feature on the current state of affairs in the UK. So what are the potential dangers of this? Well, one of the obvious concerns is the effect it has on the tax base. In the UK, the top 1% of income taxpayers account for 28% of all income tax. If a large portion of these people leave, then so does an even larger chunk of
current and future tax revenue, putting additional strain on a fiscal system that is already unable to cover its spending levels. If the people leaving are mostly passive asset holders, the impact may be limited. But if they are founders, serial entrepreneurs, and investors, then the loss is not just tax revenue. This group drives business creation, capital deployment, employment opportunities, innovation, and the multiplier effect these things have across the wider economy. Now, it's worth noting that it's much easier said than done for an individual to simply uproot themselves and leave a country. People have families, social networks, emotional connections, physical assets, and non-mobile business structure also
influenced decision-making. But when the low tax non-domicile regime was abolished, inheritance tax was extended to worldwide assets, and taxes on investment income were increased, the UK clearly became less attractive to internationally mobile wealth. Following these changes, New World Wealth forecasted that the UK was projected to lose around 16,500 millionaires in 2025, taking an estimated $91.8 billion in investable wealth with them. Following this, news of a millionaire exodus from the UK spread like wildfire, and the narrative still runs strong based on these forecasts to this day. The issue is that these statistics are dubious, if not misleading. The figures have faced
serious criticism for inaccuracy due to a weak methodological approach and a vested interest from the source organization who profit from assisting wealthy families migrate. There's also academic evidence that high earners are less responsive to tax changes than headlines often suggest. While some wealthy individuals are undoubtedly leaving the UK, the immigration of UK millionaires is likely a much smaller matter than the mass exodus event often referenced. The difficulty is knowing just how many are leaving and whether this is actually having a significant impact on the economy at large. One way to gauge that is to look at whether the UK continues to harbor entrepreneurs and
investment. On this we know that the UK and London in particular continues to lead globally when it comes to tech startups and venture capital. London has the fourth largest tech ecosystem in the world. This naturally attracts entrepreneurs and high-skll workers and its position as a leader in this space has only grown in recent years despite the recent tax changes we mentioned. 54 of the 100 fastest growing companies in the UK have foreignb born founders and the city continues to have plentiful access to venture capital and other sources of investment. If there really was an exodus of wealth, then London's tech ecosystem would not be prospering in the way it is today.
However, there is a more tangible change in migration patterns that we know will matter economically for the UK. We already covered the surge of net migration around 2023, but since then, restrictive government policy reforms have been introduced, resulting in a huge collapse in immigration. Net migration has fallen from 944,000 in 2023 to 171,000 in 2025. Demographers and economists are expecting net migration to go to zero or even negative over the next couple of years. This fall is forecasted to have a negative impact on the economy. Recent modeling predicts that net zero migration in the UK from now to 2030 would result in an economy that is 3.6% smaller by 2040. A pretty modest figure, but not insignificant.
So, what does all this tell us? Clearly, Britain has become somewhat dependent on immigration as a shock absorber. It keeps universities funded, farm staffed, and hospitals running, while an unstable, increasingly polarized government moles over harder reforms to training, wages, housing, and productivity. Meanwhile, the millionaire exodus appears far more dramatic in headlines than in the available economic data. Tax competitiveness still matters, and wealthy people are leaving the UK, but not to the extent illustrated in online media sources. And recent cuts to net migration may eventually create stronger need for the government and businesses to train more workers and improve incentives for currently
unattractive jobs. But those reforms take years while the workers, tuition fees, and tax revenues disappear immediately. The political temptation will be to relax work and study visa rules once again to address those labor shortages. But if that happens without tackling the underlying structural problems, the country could find itself right back in the same position. In this video, we covered the rise of young people not in education, employment, or training in the UK. While the issue is particularly bad for the UK, it's actually happening across much of the developed world. We recently explored why. You should be able to click into that video on your screen now. Thanks for watching, mate. Bye.
