The United Kingdom’s latest push to curb immigration could cost the economy as much as £4.4 billion ($5.7 billion), according to an internal government analysis, casting doubt on Prime Minister Keir Starmer’s pledge to bring migration “under control” without harming economic growth.
The Home Office report, released alongside Starmer’s sweeping immigration reforms, highlights the potential financial fallout of the Labour government’s plan to significantly restrict the number of foreign workers and students permitted to remain in the country.
Key Policy Changes
Under the proposed reforms, international graduates would see their post-study stay in the U.K. shortened from two years to 18 months, while English-language requirements for skilled-worker visas would become more stringent.
In addition, employers sponsoring foreign workers will face a one-third increase in the immigration skills charge, a mandatory fee imposed on companies hiring talent from abroad.
While Starmer has framed these measures as necessary to restore fairness and integrity to Britain’s immigration system, the Home Office’s projections suggest the economic impact could be negative.
The report estimates that the U.K. could lose £1.2 billion over five years, with potential losses soaring to £4.4 billion in a worst-case scenario. Even the most optimistic forecast projects a modest gain of just £800 million.
The analysis attributes much of the projected shortfall to a decline in tuition revenue from international students, lower income-tax receipts due to fewer graduates staying to work, and reduced visa-fee collections.
Concerns from University Leaders
University leaders warn that the findings validate long-standing fears that tighter immigration rules could damage local economies reliant on international education.
“This assessment shows the real-world consequences for growth and prosperity,” said Jamie Arrowsmith, director of Universities U.K. International. “Any benefit from higher tuition fees will be wiped out by other policy changes.”
Former education secretary Alan Johnson echoed the concern, warning the reforms could “close universities” if international student enrolment drops.
“The government would be making a very big mistake,” he said, “if it tries to fix migration by targeting students who bring billions into the economy.”
Experts Warn of Short-Sighted Policy
Migration analysts and advocacy groups have also criticised the government’s approach. Sunder Katwala, director of the British Future think tank, said the immigration debate has become politically charged and shortsighted.
“Policymakers are competing to promise the lowest migration numbers,” he said. “Yes, migration can strain housing and services, but it also fuels the economy through taxes, university fees, and spending.”
Declining Migration and Rising Tensions
According to official data, net migration fell to 431,000 in 2024, down sharply from 860,000 in 2023. The earlier spike was driven largely by pandemic recovery and a surge in foreign student admissions, particularly among lower-ranked universities, where study visa applications rose 49% between 2021 and 2023.
Despite criticism, the government insists the reforms will “restore confidence” in the immigration system and prevent what Starmer described as the “incalculable damage” caused by years of unchecked migration.
However, several Labour insiders and economists caution that the policy could inadvertently weaken one of Britain’s most profitable export sectors, higher education, which contributes billions annually to the national economy.
