UK’s immigration curbs may hit small Indian cos

By Nadeem Sufi

Proposed Immigration Rules Are Likely To Derail Foreign Cos’ Expansion Plans In The UK Market

The UK government is walking a tightrope between maintaining its global image as ‘open for business and anti-protectionist’, and assuaging rising anti-immigrant sentiment at home as local unemployment peaks. For the first time, UK home minister Jacqui Smith announced moves specifically targeted at economic migration and overseas investors, for long a cornerstone of Labour’s open economy credentials.

The Indian government has repeatedly raised the issue of visa barriers hindering Indian companies legitimately doing business in the UK at the highest levels. One estimate says work permits issued to Indians doubled in 2008 to almost 50,000 in total. According to the last report by the Migration Advisory Committee, work permits accounted for about 27% of total non-EU in-migration into the UK by 2007, with sectors like IT, business and professional services, finance and healthcare leading the pack.

In focus now, despite the highly-publicised crackdown last week, are two proposed measures — not announced ones — that are likely to raise hackles among overseas investors and foreign companies. One, the Home Office has sought an economic case from the Migration Advisory Committee for “an assessment of the economic contribution made by the dependents of migrants and their role in the labour market”, from its advisory panel, which is widely seen as a precursor to stopping families of professionals from coming to the UK. Next, it has also asked for an economic case for limiting employment of foreign talent in Tier 2 — which includes all company and work permit migrants — to shortage occupations only. “At this difficult time, any change in policy, which will affect the ability of the UK to attract the best workers from across the globe, should be considered very carefully, particularly if it will increase hiring and employment costs for businesses. The mantra ‘British jobs for British workers’ simply doesn’t ring true in the City,” said City of London Corporation Policy chairman Stuart Fraser, who represents the financial sector.

Both proposed measures are likely to hit foreign companies in the high-end professional sectors as well as SMEs and MMEs. “Clearly, it would be odd to tell an overseas company you can base your European CEO in the UK, but you cannot bring your family,” said Barry Gardiner, Labour MP and chairman of the All Party Parliamentary Group for Indo-UK focussed on Trade. “Absolutely, the worst thing we can do now is to retreat into protective bunkers, and we will fight for the rights of Indian companies to be as competitive as everyone else in the UK. Let us see what the policy actually brings.”

The last available figures for 2006 show that the number of dependents who accompanied permit holders were only about half the number of permits issues. The percentage of work permit holders and their dependents who settled in the UK is about 17% of the total number of dependents who settled in the UK. The bulk of dependents becoming permanent migrants are from families of resident Britons and citizens, said the report.

A case to limit overseas workers to shortage sectors only is likely to affect companies in the ICT, professional services, and other high-end sectors across the spectrum, as most of these don’t figure on the periodically updated shortage lists. Based on the MAC’s last report, overseas companies were able to use shortage sectors for only about 9% of total overseas recruitment in 2007 while the rest had to meet the resident labour test.

A spokesperson for Think London, London’s main inward investment agency, said it is common practice for companies, which set up overseas units to initially depend on trusted teams from home to oversee the new operations, and this changes in favour of hiring local talent over time. “The change in rules for skilled migrant workers do have an impact on every UK-based company that is employing foreign skilled workers, including overseas companies in London,” the spokesperson said. FDI by overseas companies accounts for 13% of the total jobs in London, about 500,000, according to Think London figures. Speaking to ET, a Home Office spokesperson said, “We introduced our flexible Points Based System to allow the British government to manage the number of people coming to the UK from outside Europe, adjusting the bar to ensure that the right people and the people we need can come. We want the UK to remain open to business and an attractive place for multinational businesses.”

Immigration experts say the measures are still at the proposal stage, and have some way to go before translating into policy. The announced changes, requiring advertisement of all jobs at JobCentres, is just an extension of the existing resident labour market test, and unlikely to throw up realistic candidates in highend professional and business jobs. However, along with other increased visa fees, sponsorship registration and maintenance fees, advertising and so on, the costs of hiring overseas talent have shot up exponentially recently, and will adversely affect the large number of smalland medium-sized Indian companies setting up or expanding operations in the UK market.