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Could a deal with India help fix Britain’s skill shortage?

·8-min read
Britain's Prime Minister Boris Johnson, right, and India's Prime Minister Narendra Modi
Britain's Prime Minister Boris Johnson, right, and India's Prime Minister Narendra Modi

Senior Tory backbencher Sir Edward Leigh exposed the tensions at the heart of the Brexit project last week with a stern warning for the Prime Minister on looser immigration controls.

The Gainsborough MP warned Boris Johnson against being “held to ransom” and thundered that the Tories’ new working class support “did not vote to replace immigration from Europe with more immigration from the rest of the world”.

It came as the international trade secretary, Anne-Marie Trevelyan, travels this week to Delhi ahead of formal talks on a free trade deal with India, which is predicted to be the world’s third-largest economy by 2050. A relaxation of stringent visa requirements for Indian workers is reported to be on the table as part of negotiations.

In response to Sir Edward, the PM stressed “we don’t do free trade deals on that basis”. But senior business leaders complain of an expensive and unwieldy visa system to bring in Indian staff as Britain struggles to fill a record 1.2m vacancies.

Cobra Beer founder Lord Bilimoria, the CBI president and the UK’s most high-profile British-Indian businessman, for instance, presses the case for more “mobility” between the two countries. Economists and migration experts, however, doubt whether a liberalised visa regime will move the dial significantly for the UK’s stretched labour market.

Opening up India’s fast-growing but notoriously protectionist economy is the prize for talent, as Britain turns away from the European Union and deepens ties with Commonwealth partners.

For all the long-standing links between the pair, and India’s status as the world’s sixth-biggest economy, a paltry 1.4pc of British goods - just £3.2bn - made its way to India in 2020, compared with £6bn of imports coming the other way. India barely scrapes into Britain’s top 20 goods trading partners, while services access is heavily restricted.

Globally, the country has just a handful of bilateral trade deals and two years ago pulled out of talks to join a partnership of 15 Asia Pacific countries amid concerns over cheap Chinese imports.

Labour market links are closer, however. The size of the Indian diaspora in the UK is estimated at around 1.5m, a “living bridge” between the two countries according to Lord Bilimoria.

In the year to June 2021, India was by far the largest source under the Home Office’s Tier 2 skilled workers scheme, accounting for more than 40pc of the 103,819 visas granted. This was despite higher hurdles on non-EU immigration for much of the past decade, as the Coalition and its hawkish home secretary Theresa May sought to reduce immigration to the “tens of thousands”.

According to the Migration Observatory, Indian workers are centred on IT as well as health. As of 2019, its data shows 20pc of workers in health and social care - some 90,000 people - born in India, alongside 14pc or 63,000 in IT. They also earn more, with the £33,000 annual average putting them among the highest paid immigrants alongside those from pre-2004 EU member states.

In theory this could help fill the UK’s vacancies. The latest ONS figures show some 71,000 vacancies in IT alone. But the cost of tapping India’s specialism can be prohibitive.

Applying for a visa can cost up to £1,400, as well as NHS surcharges pay for the worker and their families, while bigger companies must usually hand over an immigration skills charge of up to £1,000 a year. The fees can deter scaling start-ups and even irritate large multinational companies bringing staff to the UK on intra-company transfers.

Mohit Joshi, president of Bangalore based IT and consulting firm Infosys, puts emphasis on also hiring locally, but argues “the cost of using the system is high”.

He says: “We do have a very large business, we do move people around. And we do see a burgeoning shortage of skills, not just in the UK, but globally. From an immigration perspective, the lesser the friction and the lower the cost the more we welcome it, because it just makes business easier for us and for our clients.”

Those concerns are echoed by Julian David, chief executive of trade body TechUK, whose members have complained about “challenging and costly” intra-company transfers, of which India accounted for 59pc last year.

He says: “The UK-EU agreement has focused on reducing costs and fees, and businesses would like to see this on the table for the India trade agreement. Businesses have started to see reduced inflows of European talent post-Brexit and this is impacting their ability to source relevant manpower.”

The 2019 reintroduction of post-study work visas scrapped by Theresa May in 2012 has already built bridges after it triggered a sharp rise in the number of Indian students for the last academic year, topping 40,000 after a nadir of less than 10,000 in 2016. A new migration and mobility partnership, capped at 3,000 workers a year, was also agreed between India and the UK in May as a precursor to trade talks.

But experts suggest Indian workers are not about to come to the rescue even if visa costs were drastically cut, due to a skills mismatch.

Nearly half of Indian workers are in high skilled occupations under the visa requirements, yet shortages are being felt most acutely in lower skilled roles mostly filled by absent EU workers.

Veteran labour market economist John Philpott says: “I doubt it would do the trick for UK skills shortages. I’d be surprised if the potential supply of Indian labour would have skills well matched to vacancies for HGV drivers, construction workers and in food processing, for example. There might be more scope in sectors like healthcare and maybe parts of catering, though ‘Indian’ restaurants in the UK are mainly Bangladeshi.”

Madeleine Sumption, director of the Migration Observatory, adds she “would be surprised” if a trade deal with India had a transformative impact on the UK immigration system and by extension, the labour market.

She says: “The types of measures that you see in trade agreements tend to be tinkering around the margins rather than fundamentally changing the immigration system for a particular country. You're often looking at a slightly easier administrative process, maybe a slightly lower cost, maybe they can be in the country for slightly longer.”

Despite senior British Asian figures around the cabinet table such as Chancellor Rishi Sunak and Home Secretary Priti Patel, politics is also likely to intervene. With Channel boat crossings a touchstone issue for the “red wall”, ministers do not want to be perceived as a soft touch; May’s agreement also put as much emphasis on the return of illegal Indian immigrants as movement of labour.

Migration Observatory’s Sumption adds: “There are often tensions within governments between immigration policymakers and trade policymakers, because the trade policymakers have an incentive to put immigration on the table. For immigration policymakers, doing that is a bit of a pain because it makes the system they're trying to manage more complicated.”

While Lord Bilimoria stresses that “no one is asking for open borders”, he says: “Mobility has historically been important and will continue to be important in both countries’ interests - and both ways”.

Even if higher Indian immigration is unlikely to solve Britain’s labour market woes, the outcome of the talks could be a totemic moment. Johnson wants to project an outward looking Global Britain but faces Sir Edward’s calls to “connect to our supporters and control immigration”.

Squaring the circle will test the PM’s political skills to the max.

Let more Indian workers into Britain, says CBI's Bilimoria

Lord Bilimoria, the CBI president, has pressed for looser visa restrictions between India and the UK ahead of the formal launch of trade talks between the two countries this week.

The intervention of the Cobra beer founder, one of the UK’s most prominent British-Indian businessmen, comes as the International Trade Secretary, Anne-Marie Trevelyan, prepares to fly to Delhi in pursuit of a deal.

The peer said that “no one is asking for open borders” but added: “Mobility has historically been important and will continue to be important in both countries’ interests - and both ways.”

 Lord Bilimoria
Lord Bilimoria

Indian workers were granted more than 40,000 skilled worker visas in the year to June, mostly in health and IT.

Reports suggest Indian negotiators will demand changes to a complex and costly system to improve access for workers and students in return for an agreement, although the Prime Minister has come under pressure from backbenchers not to cede ground on immigration.

Prising open India’s fast-growing but protectionist economy is a key post-Brexit goal of the Johnson administration, expanding goods trade and improving access to a country where foreign lawyers are not allowed to practice.

Lord Bilimoria said: “Both India and the UK are very strong services economies and services exports also need mobility. If we're going to have the ability to have better mobility between our countries that will help our services trade, which should be very important for Britain and also for India - Indian IT workers for example.

“The less restrictions they face in coming to work here, the more they're able to work over here will be better for Indian companies.”

A Department for International Trade spokesman said: “This Government is determined to secure the best trade deals possible to ensure the UK goes from strength to strength.

“Trade and immigration are separate policy areas. Immigration is not routinely discussed in trade negotiations. We took back control of our borders when we left the European Union and have the freedom to now set our own border rules which are in the interests of the UK.”

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