The Impact Of Increased Visa Fees On The UK Economy

Introduction

In July 2023, Prime Minister Sunak revealed a plan to increase migrant fees, including a 66% rise in the immigration health surcharge to £1035 and a minimum 15% increase in other visa fees. The intention is to generate over £1 billion for public sector pay raises, which has raised concerns about economic effects and potential skill shortages.

What fees are being increased?

The immigration health surcharge, a mandatory payment before visa application, will rise to £1035 as early as autumn 2023, a 66% increase from the previous £624. Overseas students and children will also face a 65% fee increase, from £470 to £776 annually. Overall, the surcharge is 417% higher than five years ago.

Moreover, work and visitor visa fees will go up by 15%, and all other visa applications (including student visas) are set to increase by at least 20%. The plans are projected to generate over £1 billion for public sector pay hikes, funded through “prioritisation within existing departmental budgets”.

Controversy surrounds the rationale for this unprecedented visa fee surge, with concerns about its impact on the UK economy. Recent studies reveal immigrants contribute more than they consume, with a net £42.4 billion contribution to the UK economy from overseas workers, £20 billion more than received (Immigration Advice Service, 2023). International students, also facing elevated visa charges, added £37.4 billion to the UK economy in 2021/22.

Potential implications

Immigration barrister Colin Yeo calculates the total cost for a relocating family of four to be “at least £33,000” a substantial upfront expense likely to discourage potential immigrants. Academic Dr Sharifonnasabi suggests that rising visa fees “may lead specialised workers to consider countries with friendlier immigration policies… causing a skill drain”. This holds especially true for fields facing shortages, like healthcare. Census data shows over 30% of NHS doctors come from the Middle East, Asia, and Africa, highlighting the NHS’s dependency on foreign doctors. Similarly, the UK’s R&D sector could suffer. Martin Smith from Wellcome Trust’s policy lab argues that “raising money from researcher visa fees is economically self-defeating, coming at the expense of the health benefits a developing life sciences sector could bring”.

The potential adverse impact on businesses is also of concern. Companies sponsoring overseas workers will be significantly affected. John Dickie, CEO of Business LDN (a lobby group for major UK employers), recently addressed a letter to the prime minister urging a “reassessment of this measure” citing its broader economic impact. The letter highlights missed opportunities to retain international talent and the challenge of balancing rising interest rates and inflation with increased immigration levies for many firms. Law firms such as Taylor Wessing and Watson Farley Williams advise employers to increase their recruitment budgets to ensure they retain the best talent.

A Home Office spokesperson stated: “It is right and fair to increase the immigration health surcharge and visa application fees so we can fund vital public services and allow wider funding to contribute to public sector pay.”

By

Dhiya Deepu