Cutting immigration to tens of thousands would inflict £115bn of damage on the economy says think tank

The Centre for Economics and Business Research estimates reducing net immigration below 100,000 a year would make the economy between 4.1 per cent and 5.7 per cent smaller by 2030

Press Association (PA)

Forcing down annual levels of immigration to the tens of thousands, as promised in the Conservative manifesto, would inflict a significant cost on the economy and the public finances, according to a new report.

The Centre for Economics and Business Research estimates that reducing net immigration to below 100,000, from its current level of around 270,000, would reduce the level of UK GDP by between 1.5 per cent and 3 per cent by 2025 relative to otherwise and damage the tax take by around £15bn.

And by 2030 the economy could between 4.1 per cent and 5.7 per cent smaller, equivalent to roughly £115bn in today's money.

The CEBR argues immigration does not simply make the economy bigger due to a higher population, but boosts productivity growth by filling gaps in the workforce and enhancing creativity in key high-growth sectors such as IT and consultancy.

It estimates that the GDP damage by 2030 could translate into a hit to GDP per capita (so adjusting for a smaller projected population) of between 1.9 per cent and 2.7 per cent.

"The numbers here are quite shocking – they display the extent to which the UK economic model has become based on migration and show the scale of the potential negative consequences if migration slows to a very small amount compared with the current pace," said the CEBR.

The CEBR estimates echo the scenarios presented by Jonathan Portes and Giuseppe Forte for the National Institute of Economic and Social Research last year, which found that UK GDP could be up to 8.2 per cent smaller by 2030 relative to otherwise and GDP per capita 5.3 per cent smaller if immigration rates were significantly cut.

Portes and Forte also only projected a very modest boost to low-skilled wages as a result of the fall in immigration, in keeping with empirical studies showing very minor downward pressure on the wages of such workers from higher immigration over the past decade.

Net immigration to the UK in the year to September is estimated to have been 273,000 by the Office for National Statistics, down from a peak rate of 336,000 seen a year earlier.

The Conservative manifesto published last week included the pledge, first made by David Cameron before the 2010 election, to reduce immigration to the "tens of thousands".

But the defence minister, Michael Fallon, conceded at the weekend that the party had not worked out how much achieving this would cost the public finances, on the grounds that ministers did not know in which year of the next Parliament it would be delivered.

The Office for Budget Responsibility estimated in November 2016 that a 80,000 fall in the rate of net immigration would create a £6bn a year hole in the public finances by 2020-21, based simply on the fact that migrants tend to be of working age and pay more in taxes than they receive in benefits and thus ignoring any possible productivity growth impacts.

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