The UK's economy would shrink by 3.6% by 2040 if the country were to achieve zero net migration, a new report has warned. This alarming prediction comes from thinktank the National Institute of Economic and Social Research (NIESR), which believes that a decline in birth rates and reduced immigration have left the population growth trajectory at a standstill.
In essence, this means that the UK's workforce would stagnate, leading to slower employment growth and a smaller workforce. As a result, real wages and disposable income may rise initially as firms become more productive and use more machinery, with GDP per capita expected to increase by 2% by 2040. However, these gains would come at the cost of weaker economic growth overall.
The ageing population would lead to fewer tax revenues, creating a gap between public spending and receipts that would force the government to borrow more. This forecast assumes that government spending and tax rates remain constant until 2030, and then remain unchanged thereafter.
Unless fertility rates were to increase significantly, zero net migration would be "not fiscally sustainable for the UK" unless significant tax rises were implemented, according to NIESR senior economist Dr Benjamin Caswell. These tax hikes could potentially choke off economic growth, highlighting the precarious nature of the UK's economy in this scenario.
The latest decline in net migration, from 649,000 to 204,000 in the year to June, has been attributed to tightening work visa requirements by the Conservative government and additional measures by the Labour government aimed at recruiting foreign workers in healthcare. However, the number of births and deaths in the UK have remained relatively equal, with any changes driven by migration rather than demographic shifts.
The NIESR's warning comes as policymakers grapple with the challenges posed by an ageing population and declining birth rates. The report serves as a sobering reminder of the potential consequences of zero net migration on the UK economy, highlighting the need for sustained investment in education, infrastructure, and social services to support economic growth and fiscal sustainability.
In essence, this means that the UK's workforce would stagnate, leading to slower employment growth and a smaller workforce. As a result, real wages and disposable income may rise initially as firms become more productive and use more machinery, with GDP per capita expected to increase by 2% by 2040. However, these gains would come at the cost of weaker economic growth overall.
The ageing population would lead to fewer tax revenues, creating a gap between public spending and receipts that would force the government to borrow more. This forecast assumes that government spending and tax rates remain constant until 2030, and then remain unchanged thereafter.
Unless fertility rates were to increase significantly, zero net migration would be "not fiscally sustainable for the UK" unless significant tax rises were implemented, according to NIESR senior economist Dr Benjamin Caswell. These tax hikes could potentially choke off economic growth, highlighting the precarious nature of the UK's economy in this scenario.
The latest decline in net migration, from 649,000 to 204,000 in the year to June, has been attributed to tightening work visa requirements by the Conservative government and additional measures by the Labour government aimed at recruiting foreign workers in healthcare. However, the number of births and deaths in the UK have remained relatively equal, with any changes driven by migration rather than demographic shifts.
The NIESR's warning comes as policymakers grapple with the challenges posed by an ageing population and declining birth rates. The report serves as a sobering reminder of the potential consequences of zero net migration on the UK economy, highlighting the need for sustained investment in education, infrastructure, and social services to support economic growth and fiscal sustainability.
this is crazy! i mean, 3.6% shrinkage by 2040 is like, a whole different world we're living in. what if we actually had to deal with that? 
real wages might go up at first cuz companies get more efficient and stuff but then who's gonna pay for all the pensioner goodies?? 
it's like, the government's got one hand out for the elderly and the other hand out for businesses...this is a recipe for disaster! 
I mean, who needs a shrinking workforce when you can have a tiny bit of productivity boost? 2% GDP increase by 2040 is basically just a fancy way of saying "we'll all be living in austerity" 
And don't even get me started on the 'fiscal sustainability' thing... like, what's next? 
"Let's just raise taxes all around and hope for the best"? Sounds like a solid plan to me 
I've been trying to get pregnant with my partner but it's just not happening 
. Anyway back to this UK thing... I think it's so interesting that their workforce would stagnate if they don't let in more immigrants 
. Like how can a country just stop growing? It's already happening here in my city, people are moving away from the suburbs to cities and it's like a whole different vibe 
. And those tax hikes sound awful 
. With a shrinking economy, real wages might rise initially due to increased productivity, but it's hard to see how this would be enough to offset the costs of an ageing population and reduced tax revenues. I think the government needs to explore alternative solutions, like incentivizing birth rates or investing in education and infrastructure, rather than just relying on immigration 
. our workforce needs to adapt fast 
or we'll be stuck in this rut 
. and yeah, real wages might go up for a hot sec 
it's not all doom and gloom tho 
... the report highlights the importance of investing in ed, infra, and social services 
. we need a solid plan in place before 2040 hits 
... can't have our economy stagnating like that 
. I mean, we all know that our population's growing older by the day, but 3.6% shrinkage? that's huge 
! It's not just about the economy, though - it's about how we're gonna support our people as they age out... I guess what I'm saying is, we need to find a balance here. We can't just sit back and hope for a miracle birth rate boost 
, but at the same time, we don't wanna be all restrictive with visas or anything 
. Someone's gotta help policymakers figure this stuff out 
!
I'm like totally worried about this 
, and real wages and disposable income might actually decrease 
. I mean, I get that productivity might increase with more machinery 
, but it's not enough to make up for the slower economic growth 
.
... fewer tax revenues = bigger gaps between public spending and receipts 
. The government would have to borrow more, which is just a recipe for disaster 
, but this report is like, super scary 
... or else it's gonna be tough 
️. We need a balanced approach that supports economic growth while also addressing the challenges posed by an ageing population 
. Can't we all just get along 
? 
