This week CBI Scotland joined stakeholders from across Scotland in appearing before the House of Commons Scottish Affairs Committee to give the reaction of business to the UK Government’s post-Brexit immigration proposals.
With access to people and skills cited by Scottish firms as one of the biggest challenges they face, ensuring businesses can continue to access workers from overseas is crucial to the Scottish economy.
The scale of need is severe. Last year’s CBI/Pearson education and skills survey found that three-quarters of businesses in Scotland expect to increase their number of higher-skilled roles over the coming years.
However, nearly two-thirds of those firms fear they won’t have enough people with the right skills to fill them. Demand is already outstripping supply and businesses are clear: the UK Government’s immigration proposals need a change of direction if they are to work for the Scottish economy.
The biggest stumbling block for Scottish firms is the possibility of a £30,000 salary threshold for skilled workers. With the median annual salary in Scotland £23,833 and more than two-thirds of Scottish jobs paying under that £30,000 mark, too many skilled workers, often in vitally important jobs, simply wouldn’t meet that threshold.
Even with free movement, today many hospitals, housebuilders and manufacturers in Scotland are already struggling to find the people they need at salaries well below £30,000.
When you consider that alongside the fact that nearly five per cent of Scotland’s total population come from the EU, you can understand why firms across a range of sectors are becoming increasingly anxious.
Take hospitality and accommodation for example, which is vital to the Scottish economy. More than nine in ten workers in that sector in Scotland earn less than £30,000, with 12 per cent from European Economic Area countries. A salary threshold at this level has to be ruled out if the new immigration system is to work for all sectors of the economy, and all parts of the UK.
Immigration is not just about the so-called brightest and best. Businesses in Scotland need access to overseas workers of all skill levels if they’re to generate the economic growth needed to fund our public services.
Yet the current proposals would see only a temporary, 12-month route for overseas workers earning less than the salary threshold. This would encourage businesses to hire a different person every year, increasing costs and churn, having a negative impact on productivity and local integration.
It’s not good for business and it’s not good for the public either.
Access to lower skilled workers is too often viewed as a false choice for businesses between investing in staff and training or accessing labour from overseas. Nine in ten firms operating in Scotland have a learning and development strategy and more than eight in ten have a dedicated training and development budget.
The reality is that businesses need to continue to invest in their staff and access overseas workers if we are to fill the skills shortages that are already biting.
The White Paper proposals have understandably led to a return of the debate about whether Scotland could, and should, do things differently to the rest of the UK.
However, the majority of businesses continue to favour a single, UK-wide immigration system – provided it meets the needs of the Scottish economy.
A £30,000 salary threshold, for example, would be just as damaging for businesses in Wales, Northern Ireland and many other parts of the UK, as it would for Scottish firms. The median salary across the UK is £24,006, 20 per cent below the potential £30,000 threshold.
However, without significant changes to the UK Government’s proposals, it is inevitable that calls for devolved and regional immigration policies will grow louder.
Because where Scotland does differ is in the scale of the demographic challenge we face. Workforce projections by Mercer identified Scotland and the North East of England as the only parts of the UK expected to see a reduction in total available workforce by 2025, while Scottish Government figures show that all of Scotland’s projected increase in population over the next 25 years is due to migration.
So, while we may face similar challenges to other parts of the UK, getting the future immigration system right is, arguably, even more important for the Scottish economy than it is elsewhere.
Encouraging people from overseas to come to Scotland, settle, start a family and a business is not just an economic necessity, it enriches our society.
That’s why we need an immigration system that focuses on the contribution people make, rather than arbitrary numbers. One positive from the UK Government’s White Paper is the commitment to further engagement with business before these proposals are finalised.
The Home Office must use the next 12 months to listen to what businesses and other stakeholders in Scotland and right across the UK are saying. Ensuring the post-Brexit immigration system allows firms access to the people and skills they need is crucial to the Scottish economy and a change of direction is badly needed.
Gregor Scotland is policy lead for people & skills at CBI Scotland