Over the coming weeks, the Government is expected to publish further details of its proposals on trade and on immigration policies as we develop a new relationship with the European Union. The two – trade and immigration – need to be viewed together. In my fourth and final blog (for now!) on policies to boost UK exports, I am focusing today on immigration policies and how they can support British trade.
When we talk to clients about international trade, they frequently raise the importance of immigration policies. Employees from overseas not only provide specific skills and talent, they also bring knowledge of markets that helps international trade. When looking to export, knowledge of the new market’s culture, regulations infrastructure etc. is invaluable, especially to the services sector.
In addition, the openness of the UK to people from around the world is an important component of the British brand, providing a broader cultural effect that helps promote Britain globally. Exchange of people, ideas, finance and trade all go hand in hand.
It is important to reflect these points as the UK establishes itself in new international trading relationships and shapes new immigration policies. In particular, the need for more post-study visas is often identified as a priority in discussions with dynamic businesses.
Research from the London School of Economics emphasises the positive impact of immigration on trade, especially on services: “International trade in services and immigration are among the fastest growing aspects of globalization. Our findings highlight that there are economically important links between these phenomena, implying that immigration policies may impact the export and offshoring activities of services firms. Specifically, since trade in services requires the overcoming of cultural and institutional barriers to a much greater extent than trade in goods, the role of immigrants in facilitating services trade may be critical and quantitatively more relevant than in facilitating goods trade.”
This is particularly important given that 80% of the UK’s economy is services. Reforming the approach to overseas students could particularly support international trade and growth:
Recommendation 1: Reform visa rules to make it easier for overseas students to stay and work for UK businesses
Dynamic businesses have told us that post-study work visas would help them to trade internationally, by drawing on people who have been educated in the UK. They would like to more easily be able to employ overseas students upon graduating in the UK, to work for their business for a while and share their knowledge and experience of key markets, and to help the business strengthen its links with their home country or region. Our clients stress the value of successful overseas graduates returning home after working in British businesses, taking our products and services with them, helping British business develop footholds in foreign markets.
As one client explained: "we need overseas graduates to work for us for four years and then go and set up operations for us overseas in their home country".
Current post-study visa rules make this difficult and put the UK at a competitive disadvantage to competitor nations, such as Canada.
Recommendation 2: Remove students from immigration targets
The UK, like other well-established economies, has tended to exert soft power through culture and diplomacy and increasingly sees outward student mobility as another way to extend global influence. Not only do international students studying in the UK and then returning home raise awareness and understanding of UK culture and products, building global diaspora communities, but our globally recognised education sector is also a major exporter.
In 2013 total UK education exports were estimated to be £20.2bn, the fifth largest services export in the UK. The educational institutions we work with have raised concerns about the potential impact of immigration policies on their sector. Cultural attitudes to immigration play a huge part in influencing international students when choosing where to study. The perception is that tighter visa regulations, a points-based system and credibility interviews are impacting negatively on the UK’s international brand.
Australian Universities experienced a similar decrease in attractiveness and visa applications declined by 23% when the Australian government tightened immigration requirements in 2010 making it increasingly difficult for students to become permanent residents. Collaborative lobbying enabled the sector to successfully demonstrate the commercial benefit of having international students in the country, which consequently led to a relaxation of these controls. The numbers have since rebounded and international education is now seen as a high growth sector in Australia.
Removing students from immigration targets could support a globally competitive UK education sector and promote the UK ‘brand’ in global markets.
As always, it would be good to know what you think. Over the last few days, I have set out some ideas for boosting exports through a tax credit for new market activity, a collaborative model where businesses help each other to export, and immigration policies that support our exporters and the UK brand in export markets. Which do you think would have most impact? What else should business and government be doing?
As we prepare to leave the European Union, alongside new Free-Trade-Agreements around the world, we need to help our businesses with the non-tariff barriers they face when entering new markets, such as regulatory, cultural, commercial and operational issues.