Contents. Global outlook. UK economic prospects. What might be the impact of lower EU migration to UK after Brexit?

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Clare Greer
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2 Contents Global outlook UK economic prospects What might be the impact of lower EU migration to UK after Brexit? Twin puzzles UK productivity and export growth since the crisis UK Economic Outlook PwC November

19 Our analysis of the potential economic impact of migration to the UK from the EU covers: 1. Past trends in migration to the UK from other EU countries, including details of sectoral and regional variations and relative skill levels for migrant and native workers. 2. An analysis of the potential longer term economic impact of alternative scenarios for net migration to the UK from EU27 countries until 2030 using PwC s Computable General Equilibrium (CGE) model of the UK economy. 3. We consider two alternative UK population scenarios published by the ONS on 26 th October We would stress that these are purely illustrative and should not be interpreted as predictions of what will happen to migration after Brexit, which is subject to many uncertainties at present. The two ONS scenarios are: Principal population projection (the baseline in our CGE model analysis) Variant with future net migration from the EU reduced by 50% UK Economic Outlook November 2017

26 Lower migration from the EU would reduce the working age population while leaving a higher proportion of older people Figure 3.9: Percentage point difference in the proportion of the UK population in each age-group between the "Principal" baseline and "50% EU migration reduction" scenario 75 & over % -0.15% -0.10% -0.05% 0.00% 0.05% 0.10% 0.15% Source: PwC analysis based on ONS population projection variants UK Economic Outlook November 2017

27 UK GDP estimated to be around 1.1% lower in the 50% EU migration reduction scenario than in the baseline scenario (equivalent to around 22 billion at 2017 GDP values) Figure 3.7: % Difference in UK GDP between the "Principal" baseline and "50% EU migration reduction" scenario 0.0% -0.2% -0.4% -0.6% -0.8% -1.0% -1.2% Source: PwC analysis based on ONS population projection variants UK Economic Outlook November 2017

28 But UK GDP per capita is expected to be only around 0.2% lower in 2030 in the 50% reduction in EU migration scenario (equivalent to around 60 per person at 2017 values) Figure 3.8: % Difference in UK GDP per capita between the "Principal" baseline and "50% EU migration reduction" scenario 0.1% 0.0% -0.1% -0.1% -0.2% -0.2% Source: PwC analysis based on ONS population projection variants UK Economic Outlook November 2017

31 Our analysis of the twin puzzles of why UK productivity and export growth has been relatively weak since the crisis, written by our senior economic adviser, Andrew Sentance, covers: 1. Analysis of past trends in UK output and productivity growth relative to other G7 economies 2. A new estimate of relative productivity levels between the UK and other G7 economies 3. A discussion and assessment of the possible reasons for relatively weak UK productivity and export growth since the crisis 4. Summary and policy implications UK Economic Outlook November 2017

35 UK export volume growth (for goods and services combined) has been the lowest of the G7 economies since 2010, despite the sharp fall in the pound seen in Figure 4.5: Export growth in G7 economies since the crisis % p.a. increase in volume of goods and services exported, Japan Germany Italy US France Canada UK 0% 1% 2% 3% 4% 5% 6% Source: IMF World Economic Outlook (October 2017) UK Economic Outlook November 2017

39 Contacts for more information about this report John Hawksworth (chief economist) Andrew Sentance (senior economic adviser) Yuval Fertig (economist) Jamie Durham (economist) Saloni Goel (economist) For more information on our Economics services, or to access the full report, please see our website at: This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it PricewaterhouseCoopers LLP. All rights reserved. In this document, "PwC" refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details.

UK Economic Outlook July 2017

UK Economic Outlook July 2017 www.pwc.co.uk/economics Contents 1 2 3 4 Global outlook UK economic trends and prospects UK housing market outlook Nowcasting current GDP growth PwC 2 Global growth in 2017 should be slightly stronger