4 October 2023

Rising visa costs are putting the UK tech sector at risk

By Bella Rhodes

Andy Grove left Hungary when he was 20 years old as a university student fleeing an oppressive regime. In his memoir, he recalled, ‘I thought I would become a good chemist, and that I belonged in the United States.’ Just over a decade later, he became one of the founders of Intel, building it into the seventh largest company in the world.

As with America, Britain’s tech success is intimately tied to immigration. Nearly 40% of the UK’s fastest growing startups have immigrant co-founders. That the UK is one of the best places in the world to start a tech business has a magnetic pull. In return, we have reaped the benefits. Not only do we get a front seat to some of the coolest new technologies, but it has helped create jobs, bring investment, and grow the economy.

Any founder will tell you our visa system – with its red tape and lengthy processes – can leave a lot to be desired, but from today the UK’s startup ecosystem faces a new risk. Today’s increase in immigration costs could mean we lose out on the innovators that keep our tech sector at the top of its game. International students who have been accepted to study at UK universities now face a 35% increase in their visa costs. Fees are also rising for visas popular with startups like the Global Talent visa, Graduate and High Potential Individual visas, and the Scale Up Visa. The fees charged for these visas already far exceed the cost to the Home Office to process them. The Home Office takes in billions of pounds in revenue.

But the changes going into effect today are just the beginning. The cost of the Immigration Health Surcharge is expected to more than double from next year – up to £1,035 per person per year on top of application fees. Under the new fee regime, sponsoring the visa of an employee with a family of four could cost a business more over five years than paying an employee’s salary for a year. If that sounds like a bad plan for a company’s budget, imagine the impact it could have on an individual paying their own way.

We’re still facing a serious skills shortage, and in theory, immigration is part of the solution. The ever growing ‘Shortage Occupation List’ is supposed to help make it easier to hire workers from abroad. The Education Department has even offered teachers from abroad £10,000 international relocation payments to come teach in the UK, and the Home Office is currently working to expand the Youth Mobility Visa for young people to temporarily fill labour shortages. Pathways have been created to get international graduates of British universities into the workforce, and others have been designed to attract the very best of foreign talent – leaders in their fields, and people with advanced skills or high levels of educational attainment – without requiring them to be sponsored by an employer.

Despite policies that are welcoming on paper, it feels to many founders as if our visa system is doing the most to keep out the very people most other Governments are trying to desperately attract.

The new charges also mean tax paying immigrants will pay double. Their taxes support public services and the NHS – on top of the thousands of pounds in fees they pay upfront to the NHS and the Home Office. They also pay into expenses that they haven’t created, like national debt, and fund benefits they often can’t access, like the welfare system. The real risk is that the new changes disincentivise founders, coders and developers from relocating to the UK. The maths just doesn’t add up.

Silicon Valley is the tech hub that it is today because of immigrant innovators like Andy Grove. He arrived in the US penniless, but he was intelligent and he was motivated. If we want to continue to grow and scale the UK’s tech sector, we need an immigration system that attracts the best and brightest from around the world, not just the people with the deepest pockets.

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Bella Rhodes is Talent Policy Lead at Startup Coalition.

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