Immigrants have boosted UK growth, says study

The influx of Eastern European migrants has bolstered British economic growth, helped to keep interest rates low and kept the lid on inflation, a report out today from the Ernst & Young Item Club says.

About 300,000 citizens of the 10 countries that joined the European Union two years ago have taken new jobs in the UK, which was one of only three countries that granted the immigrants full rights to join its workforce.

Item, which uses the Treasury's forecasting model, says interest rates are half a percentage point lower than they would have been without the influx of new, cheap workers.

It calculates the new workforce will boost UK growth by 0.2 per cent this year, and 0.4 per cent in 2007. The migrants will pay £300m into the Treasury's coffers this year.

Professor Peter Spencer, chief economic adviser to Item, says the economic benefits of immigration have been greater because the new arrivals have settled down all over Britain and not just in major urban centres.

"The UK workforce has been younger, more flexible and economical, easing the pensions burden and keeping interest rates lower than many commentators could have predicted."

Nearly one-third of entrants in 2005 took up positions in administration, business and management services, compared with just 4 per cent in the construction industry and 12 per cent in agriculture.

"The stereotype of the Polish plumber is well wide of the mark," the report says.

Professor Spencer believes the overall increase in the workforce helps to explain why unemployment has been increasing even as employment has risen strongly.