MNI INTERVIEW2: UK Faces Hit From Labour Exodus- OBR's Miles

A 1.2% hit to UK gross domestic product from the reduction in the size of the workforce due to the Covid pandemic has been partly driven by a fall in immigration which is unlikely to be compensated soon, hitting medium-term productive capacity and tax revenues, the Office for Budget Responsibility’s David Miles told MNI.

The OBR increased it estimate of the scarring from the shrinkage in labour supply from 0.8% of GDP by 2025 in its March economic and fiscal outlook published on Wednesday to coincide with the government’s spring statement. The scarring is made up of a mix of health effects, early retirement and reduced immigration, which Miles, a member of the official UK fiscal forecaster’s steering committee, said was unlikely to be reversed any time soon.

MIGRANTS WHO NEVER CAME

“Some people have left the labour force and won't come back, some of it is to do with illness and long-term Covid and some of it is to do with accelerating retirement,” he said, adding that the other big component was a decline in net migration.

“It is the people who would have come to the UK as immigrants in the last couple of years and we don't think those people are likely to suddenly arrive now,” Miles said.

“The size of the UK economy is lower because the labour force is lower and, almost inevitably, that means tax revenue is also lower," he added.