11 September 2023

Rishi is wrong – immigration has got something to do with business

By Derin Kocer

As Prime Minister Rishi Sunak was in India for the G20 summit, many hoped that he could clinch a breakthrough on a trade agreement with his counterpart Narendra Modi. Negotiations have been ongoing for months, and reports suggest that the question of immigration reforms stands as the primary point of disagreement between the two nations. 

As Sunak was heading to New Delhi late last week, the Prime Minister’s spokesperson made the government’s thoughts clear by saying that ‘the current levels of migration are too high’. Sunak also added that he views immigration as a ‘separate issue’ from business and trade – thus explaining why he is unwilling to incorporate the issue in a possible deal. Although it’s reasonable to be sceptical of low-skilled immigration, free movement between the countries, and an economic growth agenda dependent on increasing migration, Sunak’s overall dismissal of the topic is more optics than policy.

Immigration and business aren’t separate issues at all. Sunak knows this. He was actively involved in migration debates as Chancellor of the Exchequer and spearheaded the High Potential Individual visa, which gives two-year work permits to graduates of the top 50 worldwide universities. In his last budget as Chancellor, he quoted The Entrepreneurs Network’s 2019 paper, Job Creators, which revealed that 49% of the UK’s fastest-growing businesses at the time had an immigrant co-founder (a recent update, however, has shown that has now fallen to 39%). Similarly, immigrants founded or co-founded more than half of the US’s billion-dollar companies. A 2012 study found that immigrants are more likely to start businesses than members of a country’s native population in most of the 69 countries it surveyed, including the UK. 

High-skilled migration will only get more important over time. Technological advancement and the changing world of work make talent a scarce and precious commodity. As it gets harder to innovate in many industries, cutting-edge businesses will need to find – and possibly bring over – more talent with specialised skills. Unsurprisingly, enterprise data in the UK and France reveals that companies which employ immigrants are more productive and innovative. In the US, semiconductor giants have had to delay opening new fabs due to talent shortages. It’s not a coincidence that Canada has been advertising easy migration routes for skilled workers in Silicon Valley, offering them a route out of restrictive sponsorship requirements: all advanced economies have an endless need for talent. If British businesses can’t access the talent they need, and many report it as a top concern, they will suffer.

A pro-business agenda needs to be matched with bold high-skilled migration policies. An optical obsession with ‘overall migration figures’ falls short of recognising the contribution of skilled migrants to British business. It’s also a misleading data point since it includes international students coming to the UK, the overwhelming majority of whom leave upon graduation. According to Migration Observatory, only 5% of 2016 international graduates remain in the UK with a work visa. 

Britain needs to reform its immigration policies not to secure a trade deal with India but to get ahead in the race for talent, to innovate more, and to give British businesses access to top talent to hack healthy economic growth. That’s why I proposed in our recent The Entrepreneurs Network report, Passport to Progress, in partnership with ABE Global, a number of bold policy ideas. 

The first step would be to expand the High Potential Individual visa. It’s already a bold and world-leading policy but it can go much further. Top business schools and research-driven universities aren’t included in it simply because they don’t perform well in international lists of top schools due to their specialised structure. However, some of these universities, such as the famous Indian Institute of Technology Ropar, typically produce graduates with much higher earning potentials than many of the ones that are included. Additionally, rather than only looking at academic achievements, the definition of a ‘high potential individual’ could be expanded to professionals experienced in the world’s most selective businesses or entrepreneurs with a track record of success. 

Secondly, the sponsorship requirements for migrant high-skilled workers must be made more flexible. Under the status quo, there is a bias towards big firms with financial means to cover the costs of bringing talent over and the bureaucratic burden it creates. Startups and growing companies, meanwhile, shy away from hiring migrants even though they need them. This is harming the innovation potential of Britain. 

To fix this imbalance, officials should explore creating a points-based sponsorship system – which would incorporate firm size, investment history and revenue – to better include startups in the sponsorship schemes without much bureaucracy and their sponsorship costs can be reduced in comparison to larger firms. In this way, stock options can be framed as alternatives to salary thresholds in sponsorship requirements. Startups mostly operate with scarce resources and stock options are a crucial way for them to attract talent, and incentivise growth.

Thirdly, for people with advanced skills in strategic industries that underpin the government’s aim of making the UK a ‘science and technology superpower’, sponsorship requirements could be abolished altogether. In the competitive environment we find ourselves, the UK should make a compelling case for STEM talent. This could include granting advanced STEM graduates permanent residency upon graduation. For PhD students, it should come even sooner – at the moment, they can’t establish their own firms with study visas, which incentivises them to leave after finishing their degrees. 

Lastly, to retain talent, the UK must see international students as an important part of its future workforce and not simply as revenue raisers. Canada has been exceptionally successful on this front, growing its attractiveness for top international students six-fold in the past two decades. It achieved this by providing international students with a stable path to permanent residency and employment upon graduation. The UK should learn the right lessons and grant top international graduates the right to unsponsored work and count their years spent as students toward permanent residency. 

Many of these reforms would be compelling to top talent – not just from within India, but all over the world. However, the political mindset that restricts migration to a misleading headcount misses the point. The race for talent is more fierce than ever and pretending immigration and business are distinct policy areas will do nothing to help the British economy. 

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Derin Kocer is a Researcher at The Entrepreneurs Network, a think tank focused on making Britain the best place to launch and grow a business. He is the author of 'Passport to Progress', an international study of high-skilled immigration.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.