Trade and economic disruption are the channels through which the immediate impacts of EU Exit have materialised. However as the majority of academic studies have shown, the impact on productivity and net migration are the main contributors to the difference in economic performance compared to EU membership. This is primarily due to the importance of both channels to the overall productive capacity on the economy. Over time they will have a much greater and more permanent impact on the size of the economy and are where the greatest gains from a closer relationship with the EU would be found.
National Records of Scotland's latest population projections show that Scotland's population will only grow due to inward migration as the number of deaths with outweigh the number of births. These figures do not take into account the ending of free movement or the impact of the COVID pandemic on migration.
Scotland faces a very different population challenge to the rest of the UK. While inward migration is the main driver of population growth across the whole of the UK, in England and Northern Ireland the natural change is positive (as the number of births outweigh the numbers of deaths). In Wales and Scotland the natural change is negative, although to a greater degree in Scotland.
It was estimated that in June 2020, 231,000 EU nationals lived in Scotland. However, the growth in the number of EU nationals working in Scotland has slowed since the EU referendum. National Insurance Number registrations of EU nationals in Scotland for the first quarter of 2021 were 70% below their pre-pandemic levels; however, the allocation process was disrupted as a result of the coronavirus pandemic. The reduction of EU migration to Scotland is in line with analysis by the independent Expert Advisory Group on Migration and Population, estimating a 50-80% reduction in net EU migration to Scotland after 2020.
Lower migration will be particularly harmful to sectors that rely on migrant workers, including textiles, agriculture, social care, leisure and travel and sales. ONS Business data for the period 11 January to 24 January, showed the proportion of accommodation and food businesses in Scotland that reported a decrease of EU workers over the previous nine months was 12.1% – more than double the rate for the economy as a whole (5.5%).
This evidence is consistent with the recent study by Indeed job platform. It found that EU nationals are less likely to seek work in the UK. Searches from EU jobseekers on Indeed were down 36% since 2019, suggesting that businesses planning to recruit from overseas are likely to face challenges. According to the study, that decline in EU jobseeker interest is likely to be a consequence of the ending of freedom of movement for EU citizens in 2021 rather than the pandemic.
At the same time the demand for workers is increasing. Data from the jobs website Adzuna collected by the Office for National Statistics shows that vacancies in the last week of May were 20% higher in Scotland than a weekly average in February 2020, mainly driven by the manufacturing, distribution and catering and hospitality sectors. Higher number of vacancies in these sectors can be a reflection of the relaxation of restrictions, but also of businesses struggling to fill vacancies due to a decline in the numbers of EU workers. This trend is likely to worsen as restrictions ease. The opening up of the tourism sector for example raises real concerns as to how vacancies can be filled. Industry representatives have said there is currently a shortfall of about 188,000 workers, with a particular shortage of front-of-house staff and chefs.
Other sectors such as agriculture are already experiencing labour shortages and challenges are likely to increase. According to Scottish Government research there were around 9,300 seasonal workers in Scottish agriculture in 2017, a sector heavily reliant on non-UK workers, particularly from central and eastern Europe. As such, another survey indicated that labour shortages were already evident in 2017, with 48% of respondents stating that they had 'difficulty harvesting' due to labour shortages. The Scottish Agricultural Census, undertaken by RESAS every year in June, also showed that there was a 4% decrease in seasonal labourers between 2019 and 2020. It is therefore likely that the EU Exit will continue to have adverse effects on the seasonal workforce in agriculture.
Scotland's cultural and creative sectors are good examples of sectors impacted by the loss of freedom of movement in both directions. The full effect will only become apparent with the end of COVID restrictions. For sectors that have at their very heart collaboration, exchange and internationalism it is certain that increased barriers to working with their closest international peers will present a massive challenge and seriously hinder their recovery from COVID.
The increased cost and administrative burdens of touring will put working in the EU beyond the reach of many of Scotland's artists, for whom the ability to tour internationally is vital in terms of reaching new audiences, generating income, collaborating and building vital networks across borders, and showcasing Scotland internationally. Additionally, the UK Government's refusal to negotiate continued participation in the Creative Europe programme remains deeply concerning. As one of the key mechanisms that supported Scotland's cultural and creative sectors to develop new international relationships and fostered cultural collaboration, the programme made new connections for Scotland across Europe and beyond. Its loss will be felt keenly.
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