London Chamber of Commerce and Industry s Response to UKBA s Consultation on Employment-related settlement, Tier 5 and Domestic Workers

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1 London Chamber of Commerce and Industry s Response to UKBA s Consultation on Employment-related settlement, Tier 5 and Domestic Workers London Chamber of Commerce and Industry (LCCI) is the capital s largest and most representative business organisation, with some 2,500 members across Greater London, ranging in size from multi-national companies to SMEs and sole traders. LCCI has contributed on a number of occasions to consultations published by both the Migration Advisory Committee (MAC) and UK Border Agency (UKBA) and welcomes this latest call for evidence. LCCI continues to understand the political pressures around migration, however, LCCI is extremely concerned about the lack of flexibility inherent in the caps implemented in April 2011 which may have a detrimental effect on London s competitiveness and productivity. Furthermore the government s decision to limit the number of Tier 2 non-eu migrants to 21,700 a year (and a further monthly limit) was an unwelcome surprise which could deprive London of some of the best and brightest professionals in the world. LCCI is calling on the government to implement an immigration system that minimises damage to London based firms. For this to happen, LCCI feels a reversal of the arbitrary caps that were implemented in April 2011 is necessary. The proposed reforms for settlement will again impact on the capital s firms. It is in this capacity that LCCI is responding to this consultation, outlining the views of our member businesses below. Attracting the best and brightest LCCI welcomes the government s introduction of an exceptional talent route in order to attract highly skilled individuals to the UK. However many highly skilled workers will be unable to apply for this route (which has a limit of 1000 places, and individuals must be nominated by one of only four professional bodies). The government must realise that in order to attract the most talented workers, and for the capital to remain a global competitor, then the current caps on Tier 2 non-eu migration must be reversed. Furthermore, defining Tier 2 as temporary will simply deter skilled migrant workers from coming to work in the capital in the first instance. Those workers with a family, for example, will be particularly discouraged from working in London under what will be deemed a temporary route, damaging the UK s reputation as open for business. Businesses must have access to the best talent available. LCCI is aware of the need to tackle the current skills shortage within the UK and to look at where skills shortages lie within London;

2 however, this is essentially a long-term task. In order to remain competitive, firms must be able to recruit from overseas. For example, the UK is a world leader in terms of its education industry and the capital is seen as a high quality research centre. In order to remain internationally competitive and to retain the best international academics, the government must take a more flexible approach to the length of time Tier 2 migrant workers can stay in the UK. For some businesses in certain industries, there is no longer a route through which they can recruit the necessary highly skilled workers for the job. Speaking about a client, one LCCI member said that an international fine dining restaurant is currently struggling to bring over highly skilled head chefs to work in their London restaurants. Although head chefs are on the shortage list, some do not have the required level of English proficiency to come to the UK under Tier 2 (General). Furthermore they cannot come and work in the UK via the Intra- Company Transfer route as chefs are not graduate level occupations. There is therefore a gap in the hospitality sector for highly skilled workers to come to the capital. London is a renowned cosmopolitan city and is known for its strong cultural mix, however the current immigration system and the continual reforms is not relaying this image to the rest of the world. The government are right to say they want the best and brightest to come to the UK but the current system and new proposals do not allow the most talented workers within each sector to fill vacancies in the UK. One LCCI member that runs a hotel and conference centre in the capital also raised the issue of certain sectors being overlooked such as hospitality and leisure. General hospitality occupations are not defined by UKBA and the government as skilled however high level management is very much a skilled profession and expectations from customers are high. Some businesses are concerned with the government and UKBA s definition of highly skilled and would like to see the term redefined in order to allow the most qualified people within each sector to work in the UK. Businesses also voiced their concerns about the government introducing reforms too hastily. One LCCI member spoke of a firm within the aviation industry that had recruited a senior figure which was initially granted under the visa airport-based operation ground staff on an overseasowned airline. This was a specialised visa that was withdrawn on 27 November The only way to extend this visa was to transfer to Tier 2 (General), as Tier 2 (ICT) was not available to them. However, there were no means to extend the migrant s visa during the transition period (July 2010 to April 2011) as the regulations simply failed to consider extensions to ground staff visas. The regulations overlooked this category of skilled migrant workers. There are anxieties within the business community that examples such as these will surface again as the government introduces more and more reforms. Allowing settlement to be an option Although settlement is not always the number one priority for business when deciding whether to recruit overseas workers, denying this option in its entirety will make it more difficult for firms to attract the most talented migrants that the government is eager to encourage to the UK. There is still a significant proportion of businesses that look at the option of settlement when deciding to accept a job offer within the UK. Although an employer may bring over a migrant worker with the initial plan being for them to stay for the maximum period before returning, circumstances may change. Developments and growth within the business or accelerated career progression from the worker may lead to the worker applying for settlement. Highly skilled migrant workers often bring overseas knowledge and expertise to the capital. In order to maintain this growth and potential expansion of an organisation, it may be appropriate for them

3 to apply for settlement. Furthermore, some overseas workers will be deterred from entering the UK, if after five years they are not granted some form of status, such as the ability to settle. LCCI feel that restricting the ability of skilled and highly skilled migrants to permanently settle in the UK creates a wide range of uncertainties surrounding recruitment and expansion plans for the capital s businesses. Removing the option to settle makes it harder for businesses to make meaningful investment in overseas staff. This consequently has negative impacts on businesses growth and expansion plans at a time when it is essential for firms to grow to recover from the current economic climate. Furthermore, the government s proposals on implementation - to bring in changes to migrants who have come to the UK since April will create further uncertainty among employers and employees alike as to what reforms apply to them. Uncertainty is a major concern among businesses of all sizes. Although some projects and work streams are short-term, many continue into the medium or long-term and may require workers to come to the UK for more than five years. The proposals will make it difficult for firms to plan ahead and will hamper their decision-making processes. For example, many firms bring over senior officials under Tier 2 (General). After three of four years, these workers gain expertise in their organisation. Businesses feel that it is not productive to send someone back after five (or three) years when they have gained extensive knowledge within a company, to then have to recruit another worker from overseas to re-train again. A commercial law firm based in the capital has a number of clients who bring over senior officials to manage more than one project although some workers will be bought over for short term projects, the most qualified senior figures who are good project managers need the flexibility to stay longer if required. Moreover, the proposed reforms will simply deter highly skilled migrants from coming to the UK altogether. Highly skilled workers are often recruited to fulfil a specialist role that means that new business, investment and jobs that support those skilled jobs follow, thus expanding the labour market. The view that migrant workers are displacing domestic workers is somewhat short sighted given the serious skills shortages in both the capital and the rest of the UK. For some firms, the right skill set is not available domestically and for that reason they must recruit from overseas. Restrictions on settlement will affect the competitive ability of businesses to recruit the best talent even further. Need for flexibility LCCI is calling for greater flexibility on the length of time migrant workers under Tier 2 (General) can stay in the UK. As mentioned above, any arbitrary cap may lead to businesses losing skilled migrants half way through a project. A more flexible approach would allow firms to ensure the best people can remain in the UK. Migrant workers substantially boost the London economy. A 2009 LCCI survey of business leaders found that 65 per cent of companies say that on balance immigration has a positive effect on London s economy. It also showed that seven in ten London firms believe the capital would be less competitive without migrant workers. Essentially, by capping the maximum stay at five years, the government is cutting off further contributions that can be made to the economy, at a time when it is very much needed. The proposals suggest the possibility of creating a new category for exceptional Tier 2 (General) migrants to switch and apply for settlement. If the government is to go ahead with the proposals

4 to make Tier 2 a temporary route, then they must create this route to allow Tier 2 migrants to apply for settlement. However LCCI is concerned about the government s use of exceptional, how this will be defined and what criteria will be set. The consultation proposes a robust selection criteria as well as a limit on the number of migrants allowed to switch. However LCCI believe there should not be any limit or cap on the number of Tier 2 migrants who wish to switch and apply for settlement. The government will also need to think carefully about the selection process. The newly introduced exceptional talent route has a limit of 1000 places per year and prospective applicants are to be put forward by The Royal Society, Arts Council England, The Royal Academy of Engineering or the British Academy. If the government put in place a similar selection process and limit, then London will undoubtedly lose its international competitive edge. Any selection process should be clear and coherent whilst allowing employers to demonstrate the capabilities of their employee and the contribution that individual makes to their business and the UK economy. The proposed five years or possible three year limit will also affect businesses turnover. Firms want to retain staff and a high turnover of employees inevitably has a negative impact on an organisation. Any set limit will automatically increase a business s turnover rate and may impact the productivity of that organisation. Impacts of caps to Tier 1 and Tier 2 must be considered first The new proposals will significantly reduce London and the UK s international competitiveness. The current complexities surrounding Tier 2 migration have prevented some companies from recruiting altogether. Others say they spend much of the recruitment process on the UKBA website looking to seek information on what the immigration system s rules and regulations are following the changes implemented in April Speaking on behalf of their clients, a Londonbased solicitor, said that there have been so many changes to the UK s immigration system in recent years that for some companies it is becoming less and less viable to employ a migrant worker, despite demand remaining the capital s labour market. The arbitrary caps to Tier 2 non-eu migrants introduced in April 2011 will undoubtedly have significant impacts on London s competitiveness. Businesses are still struggling to understand the new reforms and adhere to new regulations. Moreover, the government is yet to assess the impacts these caps have had on business and the UK economy overall. LCCI feel that the current Tier 2 route is far too complex, bureaucratic and burdensome on employers. There is a need to immediately address these real and on-going issues before additional reforms are made to the UK immigration system. Referring to the proposal to retrospectively implement the changes to those entering the UK since April 2011, a professional business network, within LCCI membership, highlighted the need for firms to know of the changes prior to implementations, in order for businesses to carry out full risk assessments as well as plan for the future. The retrospective way that the proposed changes will be applied make it difficult for businesses to determine how long employees are entitled to stay in the UK. Therefore LCCI propose that the government does not make any additional changes to Tier 1 or Tier 2, including defining them as either temporary or permanent until a full assessment has been made of the caps introduced in April At the earliest, the government should not look at making any reforms to the immigration system until April 2012 and not until the Migration Advisory Committee has been commissioned and completed a report on the impacts of the caps on the UK economy. LCCI is calling on the government to take this into careful consideration before going forward with additional immigration reforms.

5 Tier 2 is currently running under half of its capacity. This makes it likely that the government will cut the numbers again in April However the government and UKBA must consider that these low figures are due to the complexity and lack of understanding among the business community as to how to bring a worker to the UK under the newly reformed Tier 2 route. Therefore the impacts of the caps may not be seen this year but will undoubtedly be felt in the upcoming years. Furthermore the lower number of migrants coming to the UK under this route is likely to be due to the continued fallout from the recession making firms less likely to recruit. When the economy begins to pick up and grow again, businesses will be creating new jobs. Although many firms will recruit within the resident workforce, some may need to source labour from overseas; additional caps will prevent firms from hiring the best people for the job. For example, many Indian IT companies recruit workers under Tier 2. Although in some cases the value of migrant workers still outweighs the costs and complexities of obtaining a visa for them, some firms have told LCCI that they have not recruited migrants from India, who are best for the job, in order to escape the burdensome processes and strict criteria that now apply to Tier 2 migrant workers. It is for this reason that Tier 2 is currently running under capacity. UK immigration system should be seen as a competitive factor Having focused predominantly on proposals of settlement and limiting the maximum stay to five years, LCCI believe there is also a need to address the possible impacts of requiring dependents to have set English language proficiency. LCCI is somewhat thrown by the idea that the proposed changes would require dependents of skilled migrants to pass an English proficiency test. To LCCI knowledge, there are no other globally competitive countries that require such a criterion from a dependent. The proposal for a certain level of English proficiency for dependents will, among others, particularly impact Indian IT companies. Although some spouses and dependents do have a strong level of English, not all dependents will have to the standard proposed by UKBA. Therefore, LCCI proposes that the government scrap any English requirement for dependents. If the government go ahead with this proposal then this will discriminate against those workers with dependents. This will not only foster an environment of unequal treatment, but also mean the potential loss in economic rewards associated with them, such as private schools and housing. UKBA must also take into consideration that obtaining any visa in the first instance is a commitment from both the employer and migrant worker. Obtaining a visa is often a difficult and lengthy process, especially in terms of securing sponsorship and firms can be penalised for minor mistakes. Moreover, routine audits by UKBA require a substantial amount of time and resources for a firm. An LCCI member told how a major financial institution was audited recently, which required a great deal of preparation time and resources to ensure that they had all the necessary information available for the UKBA. This reputable institution sponsors thousands of migrants under Tier 2, and has a 99.9 per cent compliance rate however a small technicality for that 0.1 per cent was enough for UKBA to issue a penalty. UKBA must understand the time and resources dedicated by a sponsor during an audit and that changes to rules and regulations and lack of clarity burdens businesses further. Businesses need clear sight of the future. The government cannot expect businesses to make investments in people if the future is unclear. Both the government and UKBA must also take into account the time and resources employers spend on complying with the ever-changing rules and regulations around obtaining visas. Moreover, the cost of obtaining a UK visa is expensive especially for those SMEs who are

6 licensed sponsors. Reforms to the system have significant financial impacts for small businesses. London is a renowned financial hub and UKBA sometimes focuses on this industry when determining salary-based criteria for allowing migrants into the UK, and to settle in the UK. However there are certain industries and sectors that struggle to meet current salary criteria. UKBA continues to increase the minimum salary, which can be an issue for those within sectors such as engineering, IT and pharmaceuticals. The government must not forget that some migrant workers have vital supporting roles, which may not meet the minimum salary requirements. This is also true for the technology sector. The government want the UK and London in particular to become more involved in the hi-tech industry especially in East London; however migration regulations will prevent essential migrants in this sector from coming to the UK. LCCI members have also raised concerns on the impact continual changes to the UK immigration system will have on inward investment. A solicitors based in the capital said that some international clients had raised concerns about setting up in the UK. Although the government introduced the new Tier 1 route, it is the changes to the system that are still deterring both investment from international companies into the capital and potential entrepreneurs from setting up in London. Furthermore, we have already heard from some members that difficulties are also arising under the Tier 1 (Entrepreneur) route. For example applying for an extension can be onerous and some firms are struggling to meet the strict extension requirements, particularly in the current economic climate. Conclusion Businesses understand that the changed economic and political climate in recent years has bought about new changes; however retaining regulatory certainty is critical for the capital s firms to plan for the future and grow. Radical reforms to Tier 1 and Tier 2 non-eu migration have already heavily burdened businesses and restricted their ability to recruit the best possible workers. The coalition government has pledged to reduce net migration; however growth and job creation should remain the prime focus. In order to remain globally competitive, businesses must have access to the best pool of talent so that firms can prosper and lead the way to a full economic recovery. If you would like to discuss this matter further from a business community perspective, please do not hesitate to contact me at or on (0) Yours sincerely Dr Helen Hill Director of Policy and Public Affairs

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