Anthony Hilton: Curbs on migrants will blunt our tech edge

It is much more than just fintech — applications in the financial sector. The City has an almost insatiable demand but this should not be allowed to obscure the fact that every aspect of business and commerce is involved.

But the vital third ingredient was people. The British have always been creative — we are much more respected in the world for our culture, arts, media, design and computer games than we are for our manufacturing — but that on its own was still not enough. The magic ingredient was the additional arrival of tens of thousands of young people from the rest of Europe, in particular in the years when the eurozone crisis was at its worst and there were fewer jobs at home.

This was the real trigger. They provided the numbers to such an extent that McWilliams believes upwards of 40% of those active in the sector are EU-born rather than British-born.

But more important than the sheer numbers was the diversity because that is the rocket fuel of innovation. A diverse workforce will deliver better results than a similarly talented homogeneous workforce. It sees the problems and solutions from a variety of perspectives.

It is worth noting, however, that most migrants came without a job and, although computer literate, few had specific skills. There were no employers to vouch for them because the sector is all about start-ups. This suggests they would have been unlikely to be given work visas if the mooted strict controls were already in place.

Migrants boost creativity with their own ideas and stimulate creativity in others. People from different backgrounds and cultures think in different ways, and interact and approach tasks differently.

Out of this comes a wider range of ideas on how problems can be approached and solved. All this is under threat because of the Prime Minister’s determination to reduce the flow of migrants. Tech companies are only as good as the people who work in them and if the people can’t come here, the business will go to them.

This is already happening. Simon Black — chief executive of PPRO, one of the faster-growing fintech companies, was quoted at the weekend as saying: “The exodus is beginning.” He did not know of any fintech company that was not thinking about its options, and he had decided to expand in Luxembourg rather than the UK to guarantee access to the EU after Brexit.

“We have 20 people in London and that has grown rapidly. Without Brexit, I would have been confident that within five years, it would be 200,” Black added. “Now it would be more like 40 or 50, with most of that difference going to Luxembourg.”

McWilliams feared this might happen, and says in his book that one of his purposes in writing it was to show starkly how great might be the costs of curbing immigration from the EU. “One thing is clear,” he writes. “Starved of its supply of highly talented immigrants, the Flat White Economy will stagnate or worse. Politicians have a choice — they can kowtow to public hostility to immigrants and kill the goose that lays the golden egg of economic growth or they can choose to support economic growth by resisting curbs on immigration.”

He goes on to estimate that the kind of curbs favoured by the Government would halve London’s growth rate from 4% to 2% and that of the UK as a whole from 2% to 1%. When he wrote the book in 2014, he calculated that 10 years of continued migration would boost the overall size of the economy to £2.688 trillion by 2024. With no immigration, he forecast it would be £2.441 trillion.

The annual cost of restricting immigration is the difference in those numbers, and would be £233 billion a year by 2024. The impact on individual income or GDP per capita is similarly dark. With immigration, the average rises to £39,128 against only £36,820 if immigration is stopped. Thus Theresa May’s pledge to bring immigration to a virtual halt translates into a 6% pay cut for everybody six years from now, and ever after.

*The Flat White Economy by Douglas McWilliams, published by Duckworth Overlook