Brexit deal: How does the migration from Visegrad countries affect British economy

By Paweł Wiejski | 4 May 2016

To quote this document: Paweł Wiejski, “ Brexit deal: How does the migration from Visegrad countries affect British economy”, Nouvelle Europe [en ligne], Wednesday 4 May 2016, http://www.nouvelle-europe.eu/node/1942, displayed on 19 June 2018

The Visegrad Group countries displayed an unprecedented degree of cooperation during the Brexit negotiations.  But not only the interests of the V4 countries are affected by this. Studies confirm that the inflow of Central and Eastern European workers benefits the British welfare state. The section on social benefits and free movement of the Brexit deal is therefore not only undermining the integrity of the European Union, but also directly damaging the British economy.

For many years the Visegrad Group has struggled to find a purpose and a common voice in European politics. After the four countries – Poland, Czech Republic, Slovakia and Hungary – were admitted into European structures, the initial goal of the alliance has been achieved. Activities of the group focused on the cooperation in the fields of culture, science and (to a far lesser extent) defence. Annual official ministerial meetings did not allow the V4 to become an important player on the European scene. The situation changed drastically during the past year. With the migration crisis and Brexit debate, the Visegrad countries were able not only to find a common position, but also to express it in a way that resounded in the media, and forced other countries to react.

Cooperation between Czech Republic, Hungary, Poland and Slovakia in these two issues should be explained by a convergence of interests, rather than a sudden development of a Central European solidarity. When it comes to the refugee crisis that convergence was facilitated by the political views of leaders of the respective countries. Despite various party affiliations, ranging from social democracy (Bohuslav Sobotka and Robert Fico) to conservative (Jarosław Kaczyński and Victor Orbán), a negative attitude towards refugee quotas seems to be a consensual position among the V4 decision-makers. The shared interest regarding Brexit negotiations have roots in a significant migration of the Central European citizens to the United Kingdom. This article aims at analysing the complexities of that phenomenon, regarding its quantitative aspect, the impact on the British economy, and possible outcomes stemming from adoption of the Brexit deal.

How many V4 migrants live in the UK?

Migration from the Central European states has been a concern for the UK even before the 2004 enlargement was finalised. The inflow of workers from the eight new Member States invoked fear of potential negative impacts on the labour market, such as driving down wages, increasing unemployment and overloading the British welfare state. Despite these concerns Tony Blair, contrary to his German, Belgian, Danish and Austrian counterparts, did not introduce temporary restrictions on free movement of workers allowed by the accession treaties. Unsurprisingly, from 2004 we can observe a sharp increase in overall outbound migration, from which a significant part originated from the EU-8 group (countries that joined the EU in 2004).

In the migration wave following 2004 enlargement Poles constituted the most numerous group. As of 2014 there are an estimated 853,000 Polish people living in the UK. When it comes to other V4 countries, the figures are substantially lower: 85,000 for Hungary, 79,000 for Slovakia and 37,000 for the Czech Republic. Polish citizens are now the largest group of non-UK nationals living in Great Britain, more than two times larger than nationals of India. These figures are only partially explained by the fact that Poland was the biggest country to join the EU in 2004. Overall, the V4 population in the UK exceeds 1 million people (Office for National Statistics 2015).

The fiscal aspect of migration to the UK

The economic impact of migration is often used in the internal political debate in the UK. Migration scaremongering appears not only in the far-right parties statements, but also in mainstream discourse. Terms like benefit tourism have been coined and used to describe specifically migrants from Central and Eastern Europe abusing freedom of movement in the EU only to profit from the British welfare system. Numerous studies (Dustman & Frattini 2013, Vargas-Silva 2015, OECD 2013) has shown that these claims are mostly unfounded. Overall the fiscal effect of immigration to the UK is positive, and even more so if we consider only migrants from the EU-8 countries.

The simplest way to assess net fiscal impact of migration on a fiscal system of a given country is to subtract public expenditures related to immigrants from their contributions. This impact varies in different countries. The UK is situated close to the OECD average. Surprisingly, the migrant households in the UK contribute on average slightly more than native-born ones (OECD 2013). For the EU-8 nationals (among which almost 80 per cent come from V4 countries) the net fiscal impact is even higher. Between 2005 and 2008 they contributed on average 35 percent more than they received in direct or indirect government transfers. To put this data into perspective, the UK natives contributed on average at least 19 percent less than they received. Moreover, migrants had a significantly higher employment rate, and were on average better educated than UK nationals. Despite that, their wages were significantly lower. Depending on the year of arrival, EU-8 immigrants earned from two to five pounds less per hour than UK natives (Dustmann, Frattini & Halls 2010).

As it might be expected, statistical data have a limited impact on the public opinion.  According to the European Social Survey of 2008, over 50 per cent of British citizens thought that immigrants received more than they contributed. Only 19 percent correctly assessed the fiscal impact of migration. This is precisely the reason behind the inclusion of the section on Social benefits and free movement in the Brexit deal.

Migration and the Brexit deal

There are two main proposals tackling the migration problem in the Brexit deal. The first one concerns exporting child benefits, the second one introduces emergency brake in case of an exceptionally large inflow of workers from other Member States. It is important to underline that these measures are not supposed to be a unique prerogative of the UK. These two instruments are to be made available to all countries in the European Union, through amendments to the EU secondary legislation (Regulations No 883/2004 and No 492/2011 respectively).

The impact of the child benefit's reform is fairly easy to assess. As of 2013, about 34 000 children living outside of the UK receive British child benefits. Out of that figure, over 23, 000 children live in V4 countries, mainly in Poland . In absolute values it might seem significant, but exported child benefits constitute a mere 0.26% of total UK child benefit claims. Moreover, this figure is decreasing every year (Kennedy 2014). The Brexit deal will therefore reduce government spending by a negligible sum, at the expense of a group of people contributing to British welfare state on average more than the British themselves.

The emergency brake in the Brexit deal is formulated in a rather opaque way, so it is difficult to predict its effects.  Should an inflow of “an exceptional magnitude over an extended period of time” occur, and if a Council's authorisation is reached, Member States will be able to limit the access for in-work benefits for arriving migrants. The authorisation lasts seven years, and the maximum time of restricting access to benefits shall not exceed four years for each worker. The Member State would have to prove either that the inflow of migrants “affects essential aspects of its social security system”, or that it disrupts provision of public services, or that it leads to serious and persistent difficulties in the labour market. The first two conditions might prove to be problematic, considering the aforementioned data. The final condition however is broad enough to allow the instrument to be effective.

Conclusion

There can be no doubt that the issue of migration from Central European countries was politically instrumented by David Cameron. No statistical data confirms the concerns of the British public regarding the alleged benefit tourism. The problems tackled by the section on social benefits and the free movement of Brexit deal are either insignificant, or non-existent. In a reckless attempt to convince voters to decide to stay in the EU in the forthcoming referendum, Cameron acted against the British raison d'Etat. For the Visegrad Group this has been an important lesson on the power of cooperation. They managed to decrease the length of the authorisation to implement an emergency break from thirteen to seven years. It is highly unlikely however, that this cooperation will last.

 

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Crown Copyright, Credit: Georgina Coupe, CC BY-NC-ND 2.0

 

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