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01 June 2017

PIIE: The United Kingdom's loss is Europe's gain


EU students and workers look for opportunities at home or in other European economies. This trend increases the long-term growth prospects for Europe, to the detriment of the United Kingdom.

[...]That the shift in EU citizens' attitudes towards the United Kingdom is primarily the result of the Brexit referendum is clear from the fact that other economic indicators have been benign. The British economy finished 2016 with economic growth of 1.8 percent of GDP, higher than any other G-7 country. However, the British currency lost nearly 15 percent of its value relative to the euro after Brexit, reducing the expected wages for EU citizens contemplating a move from their home country. The second reason is increased hostility towards Central European workers.

Brexit has particularly affected the flow of Polish citizens, who for more than a decade accounted for the largest net migration. This is no longer the case, as Romania has overtaken Poland as the main source of net migration. Overall migration from Central Europe is at a standstill: Only 5,000 more people from the eight Central European countries (the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia) have relocated to the United Kingdom than left for another EU country, the lowest net inflow since these countries joined the European Union in 2004. This is a tenth of the net inflow in 2015, and 1 percent of the net inflow a decade earlier.

The only Europeans still attracted to the United Kingdom are from the latest EU entrants: Bulgaria and Romania. [...]

The falling attractiveness of the United Kingdom for European citizens, particularly from Central Europe, may at first glance be interpreted as a success of the Tory government. After all, this is what Brexit was mostly about: keeping jobs for British nationals. A more-than-cursory look at the UK employment statistics shows reasons for worry. The construction, retail, hospitality, catering, home care, and agricultural sectors critically depend on Central and East European workers. They will be hard to replace with domestic workers, who find such jobs unsatisfactory and frequently reject them out of a sense of entitlement. Less known, Central Europeans also account for a nonnegligible share of employment in some professional services such as health care (7 percent), information technology (5 percent), and accounting and auditing (3 percent).  

Returning EU workers are a boon for their home economies. [...]

Full article on PIIE

 



© Peter G Peterson Institute for International Economics


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