Assessing the Impact of Recent UK Migration Policy Changes
In May 2025, the Labour government published White Paper, a policy paper suggesting the restoration of control over the labour market through reducing immigration, making it harder to move to and settle in the UK. After Brexit, following the liberalization policy under the Conservative government, there was a sharp increase in net migration, caused by a rise in non-EU citizens coming to the UK. As was stated by The Guardian, it was the historic high net migration, and the months of "mounting pressure" over the rise of the Reform UK party – infamous for its anti-immigration stance – that spurred the Labour government to set out its plan to rehabilitate the UK’s immigration system. The Paper presents the government's plans to boost growth through a controlled and managed immigration system. This shift marks a significant turning point from earlier, more tolerant policies, aiming to redefine the balance between migration control and economic demand. The new proposed immigration system aims to encourage economic growth by elevating standards for graduates and workers with higher skills. Restoring Control over the Immigration System would include reversing the long-term trend of relying on migration and increasing international recruitment at the expense of skills and training.
Based on the Skilled Worker visa baseline, around 20,000 main applicants and 22,000 dependants, the spouse/civil partner and/or children of the main visa holder, currently enter the UK each year through lower-skilled roles under the Skilled Worker visa route. With exemptions for certain occupations by raising the overall skill threshold, it is estimated to reduce the influx of people coming to the UK by an estimated 17,000 main applicants and 22,000 dependants. This would represent a total decrease of between 35,000 to 43,000 people. In May 2025, an end to overseas recruitment for adult social care as a route for new entrants was announced, meaning employers in social care must stop recruiting new care workers from overseas via those routes. An initial reduction to the list of jobs eligible for Skilled Worker visa sponsorship, as well as overseas recruitment of social care workers, took effect on 22 July 2025. The changes to English language standards will be implemented by the end of 2025. These combined changes indicate not only stricter migration pathways but also a shift in the UK’s approach to structuring its potential workforce. The White Paper set a default 10-year route to indefinite leave to remain (ILR) for most migrants, with the exception of a potentially shorter route via the “earned settlement” proposal. The latter was specifically designed for those who have made “Points-Based contributions to the UK economy and society”. Asylum/refugee settlement and family-reunion rules have also been made stricter in recent announcements. On October 1st, Reuters reported that, in a bid to confront growing support for the Reform UK party, the Labour government planned to curb immigration by ending automatic extensions of settlement and family reunion rights for asylum recipients. The Guardian warned that the government’s proposed absorption of 6% levy on income from overseas students, “risks both weakening the financial position of the sector and making it harder to compete in a global market for talent,” Jo Johnson, the former Conservative universities minister, said.
Considering such crucial policy reforms underway, the broader economic consequences have become a central focus of discussion. The Office for Budget Responsibility (OBR) projected that higher net migration would reduce borrowing over five years, partly because government spending plans did not account for a larger population. If spending were adjusted accordingly, it would require roughly £6.1 billion more in 2028/29, meaning some of the extra tax revenue from migrants would be compensated by higher public service costs. The OBR forecasts that migrants to the UK will have slightly higher labour market participation than the existing population, as they become more active over time. Higher migration could raise GDP by up to 2.2% and GDP per person by 0.8% by 2028–29, while lower migration would have the opposite effect, depending on migrants’ characteristics and business investment. From a financial perspective, a longer route to settlement brings in more money to the Home Office, becoming a part of government revenue, and reduces long-term obligations since fewer people get permanent residency and access to benefits. As reported by the Financial Times, Brian Bell, chair of the Migration Advisory Committee, noted that the shift toward higher-skilled migrants who contribute more in taxes, and rely less on public support, could give a boost to the public finances, but there will be a short-term shock for the industries that have relied most on overseas labour. Thus, although the government anticipates long-term fiscal benefits, the transition period may involve significant adjustment costs across various sectors. The UK government’s strategy combines migration management aimed at attracting higher-skilled workers and limiting low-paid workers through increased fees and extended stay provisions. However, by introducing these changes, they are potentially adding more costs to the business. Financial Times reported that the UK’s restrictions on international students and skilled foreign workers are expected to cost businesses over £40 billion and offer no net benefit to society, while visa sponsorship costs will outweigh the small savings from reduced public service spending, resulting in a net economic loss of £26.5 billion over the period.
Given these changes, it is important to understand the main reason behind this policy: by attracting skilled workers who earn more, the government increases tax revenues and expenditures, which support the budget. Skilled migrants also tend to be younger, healthier, and less likely to rely on social security, social housing, or healthcare, meaning they contribute more while costing less. At the same time, visa and residence permit fees paid by migrants or their employers go directly to the Home Office, further increasing revenue. Higher fees and longer routes to settlement, requiring more renewals, also add to government income. In the long run, the government hopes that a more skilled and higher-earning migrant population improves the overall fiscal impact of migration by raising tax revenues and reducing government spending per person.
Still, beyond financial concerns, migration also influences the overall structure of the labour market and social unity. Migrants’ employment status and earnings strongly influence their net financial contribution, as higher-skilled, better-paid migrants typically pay more taxes than those in low-wage jobs. OBR forecasts suggest that higher net migration helps reduce deficits and debt, though not enough to transform the UK’s overall financial projection. This is primarily because migrants are more likely to be of working age and therefore contribute more to public finances through employment and taxes. A higher migration could potentially lower the primary budget deficit and reduce debt as a share of GDP over the long term, even though total debt would continue to rise.
However, the social and structural effects of these changes require a different kind of reflection. If the aim of the state is to increase the national budget by raising taxes and reducing social benefits for highly skilled individuals, such measures are likely to deepen existing class divisions rather than bridge them. The government’s strategy to attract highly qualified immigrants also faces significant challenges. The path from being a graduate to being recognized as a highly skilled worker, and therefore as a contributor to the economy, is far from simple. If companies are unable to afford salaries that meet the new threshold, they may simply opt to hire British workers instead. In the long run, this would not only narrow opportunities for foreign professionals but also reduce workplace diversity and weaken the UK’s global competitiveness. Expectations for an increase in skilled migration rely heavily on current figures showing high arrivals, but these trends might not be the same if the true conditions had been known from the start. As the UK shifts its immigration policy toward prioritizing high-skilled workers, a new problem emerges: the shortage of people willing to take on the lower-paid but essential jobs that keep the economy running. Who will perform these roles if the focus moves exclusively toward attracting talents? Raising wages would inevitably increase business costs, pushing up prices for consumers. Automation could boost productivity, but implementing it takes time and investment, pushing the market into a struggle in the short term. Restructuring services might be necessary, but this could also lead to the closure of some operations necessary for the communities such as local care homes, public transport routes, and small retail shops that rely heavily on low-paid labour.
The implementation of these policies poses several potential challenges and negative outcomes. Stricter salary and skills thresholds for hiring overseas workers are likely to increase labour costs, pushing up wages in affected roles and raising expenses for certain sectors. Restrictions on dependent visas may reduce the number of migrants eligible for work, study, or dependent routes, potentially slowing growth in sectors that rely on these roles. Additionally, while reducing immigration could lower government spending, it may also lead to a decline in tax revenue, as fewer workers, students, and dependents contribute to the public finances. Until these longer-term adjustments take effect, industries that have been historically dependent on migrant labour are likely to face a period of short-term disruption.
Ultimately, the outcome of these changes will depend on how effectively the UK balances control with competitiveness, and limits with opportunity. There is no simple answer to what lies ahead, but assessing the effects of recent migration changes raises important questions about the future of the UK economy: will they lead to a successful restructuring of the labour market, or to the inevitable setbacks that limit opportunities for British workers through increasingly complex employment processes?
Image courtesy of UK moves to tighten visa rules, targets legal migration surge. Some rights reserved.
The views and opinions expressed in this article are those of the author and do not necessarily reflect those of the wider St. Andrews Foreign Affairs Review team.
