Written submission from UKHospitality (PBM0018)

UKHospitality (UKH) is the voice of hospitality across the UK, representing a sector spanning bars, coffee shops, contract catering, hotels, nightclubs, pubs and visitor attractions. The sector is a major contributor to the UK economy, employing 2.9 million people and generating £130bn in economic activity, while paying £38bn in taxation to fund important local and national services. Hospitality is the 3rd largest private sector employer in the UK; double the size of financial services and bigger than automotive, pharmaceuticals and aerospace combined.

UKH has made representations to the Migration Advisory Committee (MAC) and to the Home Office on future immigration policy as a major employer of EU-born residents. The combined food & beverage service activities and accommodation combined constitute the largest number of EEA resident employees within the UK economy according to the MAC (chart 8). As a major sector that provides great services to British society it is imperative that Government pays the utmost attention to the needs and requirements of the hospitality sector in developing a post-Brexit immigration policy.

In summary, we believe that:

• The priority of a future immigration policy should be to benefit UK economic growth
• Hospitality is taking proactive steps to develop its domestic workforce – though this is not a short-term process
• Regional immigration quotas are likely to be complex and would not necessarily work in practice
• Recruitment of EU nationals should not be costly and bureaucratic
• Restrictions on benefits for overseas nationals could be considered as part of a future policy
• An emergency brake has the potential to alleviate concerns about excess immigration
• Pragmatic reforms to freedom of movement are preferable to sectoral quotas
• We oppose the transposition of the existing non-EU tier system to EU nationals
• EU migration has not contributed to a suppression of UK wage levels
• The UK employment tax system could be reformed to benefit UK employees

1. Objectives

• What should the Government’s objectives be in drawing up a post Brexit immigration system?
• What are the implications of the net migration target?
• How should the UK address skills shortages which are currently met by EU migration?
• Should a post-Brexit immigration policy seek to reflect regional variations?

The basic requirement of Government is to ensure that a future immigration policy does not harm economic growth and contributes to a more productive society. This means listening to the needs of business and recognising genuine concerns about future resourcing needs. Of course, it also needs to take into consideration legitimate public concerns about the impact of immigration, and we would support a greater use of the Migration Impact Fund where this is viewed as necessary.

Any net migration target is questionable when the primacy of economic development is acknowledged. The UK needs to ensure that migration policy is appropriate to the level of economic activity in the country. Were any target or quota acting against the best interests of the UK economy, then we would be concerned if it was to remain in place.

The hospitality sector understands that it needs to develop its domestic workforce over the coming years, but this will not be a short-term process. Hospitality businesses have not sought to recruit deliberately from outside the UK, rather their demand for employees has been met by a supply of EU labour, where there were no domestic equivalents. This is particularly true in large, metropolitan areas. These employees, EU nationals, have provided great service to employers and customers alike and their contribution to the UK should not be underestimated.

The hospitality sector is working closely with Government on its programme to develop the UK workforce of the future. This includes proactive involvement in the apprenticeship system and the design and implementation of the new T-levels in England. We have argued that changes could be made to the Apprenticeship Levy to increase the number of starts and argued that T-levels for Catering and Hospitality could be introduced earlier than 2022.

In addition to this, the sector has applied for a Sector Deal under the auspices of the Modern Industrial Strategy and this involves a significant focus on workforce development. This includes boosting the image of the sector to enhance recruitment and to increase retention, leading to improved productivity. A crucial element of this is an industry council to manage a self-funded £3 million campaign to promote jobs in the sector as an ‘industry of choice’. The sector is keen to progress this subject to Government approval.

There are clearly regional differentials in the prevalence of EU workers across the UK and different regions and devolved nations have made claims that there should be regional quotas. We are supportive of the need to meet needs where they arise but are sceptical of how regionally set quotas or targets could work in practice. Many hospitality businesses have outlets or properties throughout the country or in more than one region and we are very wary of a regional quota system which would prevent the career progression of individual employees. We would be willing to work with Government on solutions to this issue but ultimately believe this would be answered by our first statement on ensuring that economic growth is not hampered by immigration policy.

2. Brexit Negotiations

• To what extent will trade and immigration arrangements be linked in the negotiations and in the legal text on the UK’s future relationship with the EU?
• What are the likely trade-offs?

We understand that the Government may seek to continue with membership of the Single Market and, in this event, it is inevitable that the EU Commission would require the continued operation of Freedom of Movement. Whilst the negotiations will be highly complex, we should recognise that the UK has a considerable reliance on EU nationals working in many different sectors. If Freedom of Movement ends, we must ensure that a successor immigration system allows for businesses to continue to recruit EU nationals and not constrained by an expensive and bureaucratic system of work permits and other controls.

3. Migration controls within EU single market rules

• Could the UK seek to continue to participate fully in the Single Market while satisfying public demand for control of immigration?
• What controls to EU migration or employment, additional to those currently used, are presently available to the UK Government within the single market and what might be the impact were they to be adopted by the Government? What measures are used in other EU countries?

The ending of Freedom of Movement would mean that any new immigration framework for EU nationals will have a greater degree of regulation. While it is true that the UK government chose not to require registration of EU nationals (as allowed under the Directive) we do not believe that this was because of any lobbying by business groups. Accordingly, we would not have a problem with a system of compulsory registration and nor would we have any objections to EU nationals arriving after January 2021 being required to leave were they not in employment or financially self-sufficient. It is possible that public concern about immigration may not have been so great had the powers contained in the Directive been used.

Beyond these measures, we would not be opposed to different rules on benefits entitlement being applied to EU nationals, but we would be concerned if the administrative burden were increased on business.

4. Migration controls in an EEA-type framework

• Would there be benefit in any future deal between the UK and the EU containing an ‘emergency brake’ or similar safeguarding clause? If so, what might such a provision look like and how might it be activated?
• What kind of emergency brake might be available within an EEA type framework?

We do not have any strong views on how ‘an emergency brake’ might be applied. There has been analysis of whether the reforms to the operation of Freedom of Movement introduced by Switzerland in recent years could be applied in the UK. Putting aside the question of whether such changes could be negotiated with the EU 27, we would be concerned about creating a burdensome set of regulations for businesses – especially in a sector like ours which is operationally intense and has to be responsive, very quickly, to changes in the level of demand.

However, we would be concerned about the bureaucracy (and obvious labour mobility constraints) in a system of ‘sectoral work permits’ and would prefer, as an alternative, sensible reforms to the continuation of ‘Freedom of Movement’. The management of ‘Swiss type’ reforms should be overseen by an independent body like the Migration Advisory Committee. It would be important that the MAC’s membership be drawn from businesses, the Trade Unions and local councils as well as academic labour economists.

5. Migration controls within a Free Trade Agreement

• What UK/EU immigration controls would be possible in a free trade agreement, what relevant precedents exist and what would be the likely trade-offs if the UK pursued an FTA?
• What would be the advantages and disadvantages of having the same immigration arrangements for EEA and non-EEA citizens? Would it be practical to apply existing non-EEA rules to EEA citizens after Brexit?
• Is visa liberalisation likely to be a priority for the UK’s trade partners in any potential future FTA negotiations? To what extent can the UK hope to strike trade deals without migration provisions of some kind?

We are opposed to the existing non EEA immigration rules being applied to EU nationals from 2021. Putting aside the fact that the quantitative limit on Tier 2 entrants has become a real constraint for many businesses, the costs of obtaining work permits is prohibitively high for sectors like ours.

While we know that Tier 3 is ‘available’ for occupations in Hospitality, we would much prefer the continuation of existing arrangements with additional safeguards. We wish to re-emphasise that the securest way to maintain and develop the strength of the hospitality sector and lessen our reliance on employing EU nationals is by developing vocational education and all parts of the education and careers service championing the sector as a great place to develop a career.

We are in favour of greater liberalisation for international travel (in the past we have called for more welcoming visa rules for visitors from India and China) and would welcome these as part of any new FTAs that the UK may introduce in the period post 2021.

6. Labour Market controls

• Is there evidence that free movement has had a negative impact on workers’ pay and conditions in the UK? If so, to what extent could such issues be addressed by reforms to labour market regulations? Are there relevant practices from other EU countries that the UK could adopt should such reforms be required?
• What steps should the UK take to encourage UK businesses to employ workers already resident in the UK?

The Migration Advisory Committee has been asked to consider this and we informed them of our view that we were not aware of any evidence that suggested that free movement has had negative impacts on pay or conditions in the UK. We pointed to the academic evidence that has been published, noting that it had been published before the introduction of the National Living Wage. Whilst earnings are affected by income tax and NI thresholds and changes to benefits, research from the Resolution Foundation has shown clearly that it is the lowest paid that have had the biggest increases to pay in recent years.

Wider changes in the UK labour market, such as the emergence of the gig economy, cannot be put down to free movement as they have occurred in other nations that have not seen such levels of immigration as the UK.

As we have already mentioned UK employers in the hospitality sector have not actively pursued overseas labour, it is just that the demand for employment in a growing sector has come from EU nationals. Businesses would welcome measures that enhance the number of domestic applicants for jobs in the hospitality sector and this is why it is actively pursuing a Sector Deal to improve the reputation of the sector and retention rates.

It is also why there needs to be a comprehensive education and training system in place to ensure that those leaving school are ready to join the world of work and that employees have more control over how they develop their workforce.

Subject to the terms of the final deal between the UK and the EU there may be scope for providing support for UK employees, particularly young people, potentially through the abolition of National Insurance Contributions.

July 2018