The flawed ONS migration statistics are as discouraging as the fact that migrants now feel Britain is 'toxic'

As each day passes, the British economy edges closer to the 'cliff-edge' hard Brexit that many fear and which the Leave campaign assured us could never happen. And with net migration down, it looks like the economy will be even worse affected than we previously thought

Anti-Brexit campaign group 'The No 10 Vigil' sail a boat bedecked with EU flags up the River Thames (EPA)

The migration figures, which loom unhealthily large in Britain’s national life, are usually taken to be something principally about politics and society, which they are. As our report today on the cross-party group led by Chuka Umunna demonstrates, a toxic immigration debate has damaged social and community harmony. The wider truth is that the migration figures and what they represent are also highly significant economically – and the emerging trends, from the point of view of Britain’s economic prospects, are discouraging.

The fact that, more broadly, EU citizens and others are already deciding to leave Britain – there has been a sharp spike since the referendum last year – means that the British economy will lose many tens of thousands of highly productive workers contributing their taxes to the Government and their spending to the benefit of the nation's fortunes. Many worked in public services ill-placed to recruit replacements. Some sectors, such as hospitality, hotels and agriculture will find themselves in crisis long before the UK formally leaves the EU.

The migration statistics are also taken to be accurate, albeit with some well-known drawbacks, and the Office for National Statistics is usually regarded as being a reliable source of data (though its reputation for competence since its relocation from London to Newport has taken something of a hit). It now appears that the vast majority of foreign students leave at the end of their courses and before their visas expire. This means that the whole strategy of “clamping down” on students coming to Britain to study, a policy so vigorously pursued by Theresa May as Home Secretary and as Prime Minister was based on a gigantic misunderstanding.

It is one that also brings with it substantial economic damage. We are deterring and exporting people who can and do make a tremendous contribution to British economic growth. That chapter of exceptional British economic success driven by an influx of hard-working younger talents seems rapidly to be coming to a close. The rapidly worsening plight of the pound is becoming symbolic of a general decline in prospects.

The politicians may argue as much as they like about what may or may not happen after 29 March 2019, but the markets – for which read businesses and investors – have clearly made up their minds. As each day passes, the British economy edges closer to the “cliff-edge” hard Brexit that many fear and which the Leave campaign assured us could never happen. For those with skin in the game and money and profits on the line, the risks are starting to crystallise, and they are voting with their cash.

Sterling’s latest slump to an eight-year low against the euro – thus matching the post-referendum shock slump in value last year – indicates both a lack of confidence in the British economy’s prospects after a hard Brexit, and a growing faith in the ability of the EU economy to reform and expand. From being the fastest growing of the major Western economies, attracting workers and talent from all over the world, Britain is now bottom of the league table. By contrast, increasingly bright news is coming from even the most hitherto benighted members of the eurozone – with Spain and Ireland embarking on what appears to be a particularly robust path to recovery. Greece has even poked its head over the parapet and begun to issue government bonds again. It is possible that the worst is behind the eurozone, the fragility of some Italian banks being one of the few immediate risk factors.

Contrast that with Britain. Household consumption is weak as the baleful effects of a weak pound work their way through the economy – higher prices and depressed wages representing the tightest squeeze on living standards in generations – on top of the near-decade of austerity British families have already endured. Emigration is damaging key sectors. Whether the UK will undergo a soft Brexit, hard Brexit or enjoy some kind of “transitional” period, the fact is that our trade with our biggest economic partner cannot be as easy and fruitful as it is today. By definition, there will be more friction and restrictions on the movement of goods, capital and people; the only question is the degree to which that will be the case.

The “exciting new opportunities” so often mentioned may one day materialise, but there seem little sign of the great emerging economic superpowers – China and India especially – jostling to be front of the queue to talk to Liam Fox. If anything they have thus far been unimpressed with the fact of Brexit, and even more with the British Government's obstructive attitude towards offering their students and workers visas to study, work and contribute to the supposedly “global Britain” we are about to build. Will we now become more accommodating towards overseas students – and the fees they pay to our universities – now we know that there isn’t some epidemic of overstaying going on?

Of course markets can be wrong; they often overshoot and undershoot. That is inevitable and naturally no one should place that much faith in their ability to get things right (after all, investors had not hedged sufficiently well the Leave result in the EU referendum). Yet financial markets aren’t bookies’ shops, and the investment decisions they reflect have real consequences. They already mean that Brexit will be a much tougher and more painful affair than any in the Leave campaign last year or any Government minister is prepared to admit even now. In due course they will pay a heavy political price for their failure to be honest with the British people, and that includes publishing data on student visas so far out that it looks, frankly, fictional.