What does the new Labour government mean for business immigration?

Immigration and net migration, in particular, is becoming an ever more significant issue for all political parties. As a result, under the last Conservative government, UK employers had to get to grips with various changes to the immigration system including significant updates to the rules coming in as recently as April. So, with a Labour government freshly installed what might employers, who want to recruit from overseas, expect?

Prior to its election, Labour set out a number of proposals for business immigration which are intended to reduce the UK’s reliance on overseas labour and bring net migration down.

Net migration was estimated to be 685,000 in 2023. In a bid to push down this figure, the previous UK government sought to reduce legal immigration by making a number of changes at the beginning of 2024, in particular to the Skilled Worker route. Most significant of these changes was the increase to the minimum salary threshold that is required for this type of visa and a reduction in the types of role that can be sponsored.

Interestingly Labour’s proposals to reduce net migration, as set out in its manifesto, aren’t focused (as the Conservatives had been mooting) on imposing limits on business visas, nor on further restrictions on their use necessarily. Instead Labour appears to want to concentrate on training and upskilling British workers as a way of reducing reliance on overseas labour. Whilst there is a reference in its manifesto to a reform of the current points-based system to ensure it is ‘fair and properly managed’ including through ‘appropriate restrictions on visas’, Labour otherwise relies on proposals aimed at increasing training for skills shortage areas in the UK to reform the current immigration system.

The new government’s proposals include:

1. Addressing skills shortages in the UK: Alongside a number of proposals to improve training and further education in certain sectors, Labour proposes to link the Migration Advisory Committee (an advisory non-departmental public body, that advises the government on immigration issues) to the Industrial Strategy Council and Skills England (bodies responsible for industrial and skills strategy), with the intention that shortages in the labour market will be identified and responded to in a joined-up way. The speed at which gaps in skills shortages can be plugged remains to be seen but, even if this approach is ultimately successful, it is difficult to see how this might provide an immediate solution to the recruitment challenges that many employers currently face. A focus on making the most of the UK’s resident workforce is not a new concept, albeit, in the past, we have seen it take different forms. Most notably, before its abolition at the start of 2021, UK employers wanting to sponsor non-settled workers as skilled workers had first to satisfy the ‘Resident Labour Market Test’. This required employers who wanted to hire from outside of the UK to advertise the vacancy in various prescribed ways in order to demonstrate that no one in the UK (nor in the EU at that time) could do the job, and only then could they progress with an overseas recruitment process. Labour has not, to date, suggested that it will look to reinstate the Resident Labour Market Test (or an equivalent) but it will be interesting to see whether measures requiring priority of UK settled workers are introduced further down the line.
2. Improving working conditions in the UK: As part of the intention to prioritise workers in the UK, Labour has pledged improvements to working conditions and rights for workers who are settled here (for example through fair pay proposals and the introduction of day one employment rights), seemingly (amongst other things) to encourage recruitment and retention into certain shortage areas. Sectors which heavily rely on overseas migrants, such as social care, may become the focus of Labour’s proposals for workforce plans and fair pay agreements, indeed the government has plans, which were confirmed in the Kings Speech on 17 July 2024, to introduce a new Fair Pay Agreement in the adult social care sector. Employers who fail to comply may (amongst other things) find their ability to recruit from overseas is restricted (see below). For a detailed look at the key employment proposals for employment rights, please read our update Make Work Pay – a review of the new Labour government’s plans for employment law reform.
3. Extending penalties for employers for non-compliance: In its manifesto, Labour also included an intention to place bans on hiring foreign workers for employers who are found to be in breach of employment law (such as failing to pay national minimum wage). Currently employers in breach can have their ability to sponsor overseas workers suspended or revoked or they may not be able to get a sponsor licence for these purposes. It is not clear if Labour intends to change the current regime, but possible changes may include longer bans on overseas recruitment for employers and/or more effective enforcement of existing compliance penalties such as fines or sponsor licence downgrades.

For employers who regularly recruit from overseas and those who face labour shortages in the UK, an immediate and/or significant restriction on business visas does not seem likely. Whilst the King’s Speech referenced new legislation to ‘modernise the asylum and immigration system’, the briefing notes to the speech confirm that the focus of this legislation will be on reducing illegal migration. However, the proposed Skills England Bill is also referenced in those briefing notes and is more likely to be relevant to business immigration. The briefing notes confirm that this Bill is intended to deliver on Labour’s manifesto commitment to ensure the supply of skills needed for the economy, which will involve creating a formal link between migration data and skills policy.

There remains some uncertainty, therefore, as to what the future holds for the UK business immigration system and, with an increased prioritisation of the domestic workforce we may, in time, see changes introduced which may limit an employer’s ability to sponsor a migrant worker.

This area is likely to be a moving feast and we will continue to bring you updates and commentary as the government’s proposals for business immigration take form.

If you would like to discuss how these proposals for immigration might impact your business, please contact Katie Russell or your usual employment team contact.