May’s migrant musings a cautious positive for City

September 5, 2016

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. 

Theresa May has yet to out herself as a lover of the City. As such, the UK prime minister’s apparent dismissal on Sept. 4 of so-called “points-based” migration systems could give London’s rattled banks and asset managers confidence. It could be an early sign of a pragmatic, if not generous, approach to the domestic financial sector.

The UK has an opportunity to overhaul its immigration system after it leaves the European Union. It could adopt a points-based system led by politicians, where migrants are let in if they have sufficient qualifications. It could try a more demand-led approach driven by employers, in which businesses select what they need subject to the proviso they don’t too obviously undercut home labour with cheaper foreigners. Or it could go for an open process where those who want to come in can do so – in step with the liberal approach that countries like Japan are now pressuring the UK to maintain.

The UK currently has an awkward mix of open and shut doors. The EU’s freedom of movement principle allows citizens of the 27 other states to come to Britain. Those outside the EU are subject to a points-based system in which workers are separated into tiers that are subject to quotas. For big City firms annoyed by the restrictions this creates for basing staff in London, May’s rejection of a points-based approach sounds a step forward.

The risk is that whatever approach May lands on will be driven more by numbers than principles. Net annual immigration of over 300,000 – triple the official target May reiterated in July – is perceived to be a key reason Britons voted to leave the EU. Brexiteers have publicly endorsed an “Australian-style points-based system” – on the potentially flawed logic that this will cut net immigration. If this is being binned, they will be pressing May hard to adopt an alternative to get numbers down.

That solution could well be a hybrid model, combining elements of points-based and employer-led models, but with hard caps. The risk is that what results is a restriction on both non-EU and EU workers. In that case, what looks like a positive would be anything but.

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