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BREXIT: ONS figures show Brexit starting to impact on UK economy, migration, experts say

Out-Law News | 26 May 2017 | 4:22 pm | 2 min. read

New figures published by the Office of National Statistics (ONS) show that the UK's impending exit from the EU is beginning to impact on the country's economy, according to experts at Pinsent Masons, the law firm behind Out-Law.com.

According to the ONS, the UK economy grew 0.2% during the first three months of 2017, down from 0.7% growth recorded in the final quarter of 2016. The figures revealed a slowdown in the growth in services output and declining growth in UK production output towards the end of the first quarter period this year.

Construction output also fell during the three months to March, while the UK's trade deficit widened by £5.7 billion to £10.5bn between the fourth quarter of last year and first quarter of 2017. The ONS said this was "mainly due to increased imports of oil, chemicals, mechanical machinery and cars".

"As we fast approach the general election and the all-important Brexit negotiation period, it may come as no surprise that the impact of such a seismic change in the UK is hitting the economy," said EU expert Guy Lougher of Pinsent Masons. "This will be concerning for UK big business but resilience and faith in London as a successful and lucrative global business hub is required."

"While talk of widespread business relocation has been debated, no credible alternative to the City has been identified. Businesses may be reluctant to rule this option out as negotiations gather pace. But hasty decisions prompted by disappointing figures should be avoided at all costs," he said.

This week, the ONS also reported that net migration had fallen to +248,000 at the end of last year, down from +332,000 the previous year. Net migration refers to the difference between immigration into and emigration out of the UK, and the 2016 figure is the lowest estimate of net migration since the year ending March 2014.

Although the figure is far higher than the "tens of thousands" target specified by previous UK governments, the figures show a statistically significant increase in the number of those leaving the UK, particularly those from the EU. The change in the number of those immigrating to the UK was not statistically significant, despite the Brexit vote of June 2016, according to the ONS.

"The sharp increase of EU citizens leaving the UK, and the decline of incoming EU migrants, underscores the significant impact Brexit has already had on businesses in the UK," said immigration law expert Euan Smith of Pinsent Masons. "Those that rely heavily on EU migrant workers including construction, engineering and the medical profession are likely to be the hardest hit."

"The number of people entering the UK for work has dipped, yet remains far in excess of the UK government's ambitious plans to reduce net migration to the 'tens of thousands'. Indeed, this reinforces the view that Brexit is not the immigration 'silver bullet' that some hope and expect it to be. If the government wants to achieve its target, a more comprehensive review of immigration rules will be crucial," he said.

The figures would prove particularly concerning for UK universities, with the decline "clearly indicating that Brexit has hit EU student intake more quickly than expected", Smith said. International students are classified as 'immigrants' for the purposes of UK government migration figures, although studies have shown considerable support for their removal from the targets among both politicians and members of the public.

A recent survey by Pinsent Masons found that UK workers were broadly predicting an economic downturn within the next three years as a result of Brexit. However, the majority of those surveyed said that they were confident in their employer's ability to respond to any downturn, with confidence particularly high among those whose employers had been open with them about the impact that Brexit was having on the business and their contingency plans.