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Rishi Sunak is facing calls to rethink a planned increase in visa fees for migrant workers, with business groups arguing that raising the levies will harm the UK’s competitiveness and hamper efforts to plug labour shortages.
The British prime minister announced in July that he would significantly increase the fees for migrants, including workers and students, in a move that he said would help fund public sector pay rises.
In a letter to the prime minister last week, seen by the Financial Times, John Dickie, chief executive of lobby group BusinessLDN, urged him “to reassess this measure and consider the impact of the proposed changes on [the] UK’s businesses and the economy”.
British businesses have struggled to recruit staff in a tight labour market and Dickie said that UK work visas were already among the most expensive in the world.
Under the government’s plan, the cost of a skilled worker visa for more than three years would rise from £1,235 to £1,480. The annual immigration health surcharge — a mandatory levy to fund NHS access for migrants, which has been frozen since 2020 — would increase 66 per cent to £1,035.
Combined with other expenses such as the immigration skills charge, “the total cost to bring in one skilled worker is nearly £10,000”, according to the letter from BusinessLDN, previously known as London First. “This is even before costs for dependants are accounted for.”
Dickie added: “At a time when businesses face a difficult economic outlook and are struggling with significant skills gaps, this measure undermines our competitiveness when it comes to attracting top talent compared to other countries.”
BusinessLDN represents about 175 companies, including some of the UK’s largest employers, including Lloyds Bank, Legal & General, J Sainsbury, Unilever, Deloitte and PwC.
Jonathan Haseldine, policy manager at the British Chambers of Commerce, also expressed concern about the planned rise in the immigration levies, saying wage inflation was one of the biggest challenges facing businesses.
“It comes at a time when firms are also struggling with rises in interest rates, energy costs and broader inflationary pressures,” he said. “There is a limit to how much additional cost businesses can take.”
Haseldine renewed the BCC’s call for the government to expand its “shortage occupation list” to make it easier for more sectors affected by labour shortages to hire from overseas.
Although the Treasury is delaying some government plans that would add to business costs or fuel inflation, chancellor Jeremy Hunt is determined the new fees on migrant workers should go ahead.
Hunt said last month that the fees were needed to help fund public sector pay rises of between 5 and 7 per cent, and that £1.4bn would be raised over two years by increasing visa fees and the annual NHS “surcharge”.
The Home Office said that the higher visa charge would be introduced in the autumn while the higher health surcharge would come into force at the end of this year or in early 2024.
“There won’t be a delay,” said one ally of Hunt. “We need this to fund the public sector pay awards.”
Sunak said last month he was “not prepared to put up people’s taxes” to fund the public sector pay rises and that funding the increases through higher borrowing would not be “responsible”.