'Economic elixir': East Europeans are breathing new life into Britain

Migrant workers help keep inflation and interest rates low and are set to add £4bn to GDP next year
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Immigrants are flooding into the UK - and we should be extremely grateful. That's the conclusion of an authoritative economic study being published tomorrow.

According to official figures, net migration into the UK last year was at an all-time high, with 223,000 more people arriving than leaving. That was an increase of 50 per cent on 2004, with the vast majority of new entrants coming from the new members of the European Union - notably Poland, Hungary and the Czech Republic.

But while the likes of the British National Party have been trying to make political capital from this flood of immigration, it seems the newcomers are greatly benefiting the UK economy. They keep inflation and interest rates down, and push productivity and tax income up.

This is the conclusion of the study by the Ernst & Young Item Club, an economics team that uses the Treasury's own forecasting model. It estimates that this fiscal year, immigrants will add £2bn to GDP, and that this figure will rise to £4bn next year and £6bn in 2008-09. This is feeding through to a 0.1 per cent reduction in the rate of increase of average earnings, and to the maintaining of the base rate at a steady 4.5 per cent.

E&Y reckons that without the same level of immigration, interest rates would be 0.5 per cent higher and there would be pressure to increase them further over the next couple of years.

These figures have been arrived at by taking official statistics and applying the Treasury model to them.

"[Immigration] has been an elixir for the economy," said Peter Spencer, chief economic adviser to the E&Y Item Club. "They have rejuvenated our workforce and made it much more mobile."

The new influx of workers has different greatly from other waves of immigration - such as from the Caribbean or the Indian subcontinent - because it is widely spread in geographical terms and in the types of job taken up. According to figures from the Home Office and the Department for Work and Pensions, the new workers are mainly concentrated in East Anglia and London, but the Midlands, the north of England and Scotland have also seen large influxes.

Pockets of expertise have already emerged - ranging from Polish plumbers in London to Latvian mushroom growers in north Yorkshire and Czech bar staff in Manchester. Employers find it more cost effective to fly workers in from Eastern Europe, put them up in hotels and fly them home for the weekend, than to employ British staff.

The types of job being taken are harder to measure, though it seems that agriculture and manufacturing are two of the largest employers. Anecdotally, the service industry and the building trade are also benefiting. However, numbers here are harder to measure as workers may be employed unofficially.

Professor Spencer says that immigrants' mobility has relieved job bottlenecks in the economy, which goes a long way to explaining why the UK is seeing growth in both employment and unemployment at the same time.

This influx is not good news for everyone - particularly those who are finding it difficult to get back into work after factory closures, as happened last week at the Peugeot-Citroën-owned Ryton plant in Coventry.

"The UK worker who loses his or her job is finding it much harder to find a new one, particularly if they want as high a wage," said Professor Spencer.

However, one person who will not be complaining is Gordon Brown. Migrant workers are keeping the economy steady and bringing in tax income. E&Y says the Treasury will pocket £300m in extra tax this year, £500m next and £1.3bn in 2007-08.