Magnet of London draws in thousands of migrant workers

There has been a change in the sort of staff needed. The effect of the City boom has been to attract foreigners

PEOPLE ARE flooding into Britain at the fastest rate ever. No, I don't mean the refugees smuggled in via TIR lorries at Dover, though asylum-seekers are also arriving in very high numbers. The main inflow into the UK is from economic migrants, people attracted by the strong job market.

Yet - and here is the paradox - the proportion of non-native born workers in the UK labour force is remarkably low by international standards. What's up and, given the comments by Gordon Brown in his pre-Budget statement about the need to make it easier for specialist foreign workers to get visas, what are the economic implications if this?

New figures from the Office of National Statistics on migration are shown in the left-hand graph (below). As you can see, the pattern over the last decade has been for the outflow of migrants to be pretty constant at around 250,000 a year but the inflow has almost doubled from 273,000 in 1988 to 402,000 last year. The result is that net migration last year was 178,000, compared with a mere 18,000 in 1988.

Anecdotally, the economic migrants seem to fall into three main groups. Two are young people seeking entry-level jobs; the third, older and more qualified workers attracted by the career opportunities that the London economy in particular offers.

Many of the entry-level workers are youngsters doing the world tour: people from Australia, Canada, New Zealand and South Africa who have just finished college and spend a year or so in the UK before returning to their "real" jobs back home. There may have been some rise in the numbers staying here, particularly from South Africa, but the general pattern is unchanged.

The big change is in the second group of young people, young Europeans. Ten years ago the UK job market was no better than that of Germany, France or Italy. Now it is radically different. London is now the strongest job market in Europe. The magazines make much of London being fashionable at the moment, but the real reason Europe's young come here may simply be that it is about the only place they can get a job.

From an economic point of view this migration is welcome in that takes inflationary pressure off the job market, even if it puts pressure on accommodation in the South East. But qualitatively it is not so significant as the third sort of migration, that of professionals attracted to London by the career opportunities and the take-home pay.

This is partly driven by the City's demand for financial-service staff, partly a function of the rising importance of the English language and partly a result of the flexibility and informality of the job market.

The City story is widely known. International finance is a boom industry and the City seems on balance to be increasing its market share of the global pool. This is contrary to the expectations of many people, including the Lord Mayor of London, and may not be sustainable. But for the moment the City job market in aggregate looks reasonably secure.

What has attracted less notice, however, has been the change in the sort of staff that are needed. There has been a fall in demand for pure traders and a rise in demand for things like specialist cross-border merger and acquisition skills. Overall employment has not risen much, but these shifts tend to increase demand for foreign-born professionals and decrease demand for UK-born traders. The effect of the City boom, therefore has been to attract more foreigners.

This has been reinforced by changes in ownership of the merchant banks. A very senior ex-employee of one of the merchant banks taken over by a German bank told me the other day that it had been terribly easy to get Germans to come to London but embarrassingly difficult to get Brits to go to Frankfurt. The latter simply was not seen as a career-enhancing move, while the former was seen as the way both to get on and to make a pot of savings which could never be accumulated in Germany.

But it is not just the City. Other trades, particularly in communications, find they need to bring people to London. There does seem to be some kind of English-language effect: that economies where English is the mother tongue or at least is widely spoken have grown fastest. This may be cyclical and the turn, so to speak, of the Continental language economies and of Japan will now come. But taking a snapshot of demand for jobs now, the demand is in English-speaking countries.

Certainly any professional seeking a job in a multinational corporation needs decent English, as English is becoming the working language for many non-UK or non-US corporations. Perhaps the most interesting reason for the attraction of the UK job market for foreigners has nothing to do either with the City or with English. It has to do with the flexibility of the job market.

When people talk of flexible job markets they usually use the phrase as a euphemism for being able to sack people easily. What I am writing about here is quite different. It is a lack of credentialism, the willingness of employers to take on people who have few formal qualifications and train them on the job.

It is hard to grab this issue except anecdotally, but we frequently hear of young Continental Europeans who find it easier to get middle-ranking executive positions here than they would at home largely because there is less emphasis on seniority and qualifications. British university graduates enter the job market at a younger age than those of any other G7 country (younger even than US ones) and inevitably come to rely more on on-the- job training and less on university certificates.

In one sense this means they are less-qualified, which sometimes creates problems. On the other hand, they are more flexible in their attitudes. Arguably appropriate attitudes have become more important than appropriate qualifications as desirable qualities in would-be employees.

Put this together and it is easy to see why so many foreign-born workers seek to come to Britain. Given this, it is really astounding that the proportion of them is so small. Look at the right-hand graph, which comes from a recent study of immigration by the OECD. Leave aside the oddities of Luxembourg and Switzerland, where there are large numbers of foreign- born nationals in public sector jobs and Europe stands out for its low levels of foreigners in jobs compared with Australia, Canada and the US. But the UK is low not only by the standards of the rest of the English- speaking world, but low by European standards too. We are below Germany and France, for example. What is the message here?

The message here is surely that if the UK needs more professionals to meet its demand it could take many of them in and still be relying less on foreign workers than the other English-speaking nations. We need to become even more of a magnet for global talent. The Government's plan to grant more visas to foreign professionals deserves a following wind.

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