Zero Net Migration Would Shrink UK Economy by 3.6% by 2040, Thinktank Warns
A prominent economic thinktank has issued a stark warning that reducing net migration to zero would have severe consequences for the United Kingdom's economic health and public finances over the next two decades.
Economic Contraction and Fiscal Pressure Forecast
The National Institute of Economic and Social Research (NIESR) has projected that the UK economy would be 3.6% smaller by the year 2040 if net migration were to fall to zero. This significant economic contraction would force the government to implement substantial tax increases to combat a dramatically enlarged budget deficit.
Dr Benjamin Caswell, a senior economist at NIESR, explained the underlying mechanism: "Net zero migration leaves the economy 3.6% smaller by 2040 and this reflects slower employment growth and a smaller workforce." The analysis considers the continuation of recent demographic trends, including falling birthrates and a sharp decrease in net migration observed last year.
The Demographic Stagnation Scenario
In this scenario, the UK population would effectively stop growing, plateauing at approximately 70 million people around 2030. The latest official figures indicate the UK population was 69.3 million in 2024. Dr Caswell described the situation vividly: "Imagine it as like freezing the population where it is, and then just having a continually ageing population."
The thinktank notes that initially, there could be some positive effects. Real wages and disposable income might rise as businesses are compelled to invest in machinery and enhance productivity, potentially increasing GDP per capita by 2% by 2040.
Long-Term Fiscal Consequences
However, these short-term gains would come at a considerable long-term cost. A smaller and progressively ageing population would lead to substantially fewer tax revenues. This would create a growing chasm between public spending commitments and government receipts, inevitably causing the state to borrow more money.
"In the short to medium term, it's not too detrimental," Caswell acknowledged, "but over 20 years this gap [in spending and receipts] becomes continually larger and larger." The thinktank calculates that this dynamic would cause the budget deficit to increase by about 0.8% of GDP, equating to a staggering £37 billion by 2040.
Unsustainable Fiscal Path Without Migration
Dr Caswell delivered a clear verdict on the fiscal sustainability of such a path: "Unless the fertility rate picked up, then zero net migration would not be fiscally sustainable for the UK unless there were significant tax rises, and significant tax rises could potentially choke off economic growth." This creates a difficult policy dilemma for any government.
The forecast is based on the assumption that government spending and tax rates up to 2030 follow the trajectory estimated by the Office for Budget Responsibility (OBR), with the share of government spending relative to GDP remaining constant thereafter.
Recent Migration Trends and Policy Context
This analysis follows a notable decline in net migration, which fell from 649,000 to 204,000 in the year to June 2025. This drop is largely attributed to the previous Conservative government's tightening of work visa requirements.
NIESR further suggests that additional measures by the current Labour government, particularly around recruiting foreign workers within the health and social care sectors, may bring migration levels down even further. Concurrently, the number of births and deaths in the UK have been nearly equal since the start of the decade, meaning any change in the overall UK population is now primarily driven by migration.
The thinktank concludes that while certain state payments like child benefit or jobseeker's allowance would adjust with population changes, core government investment and consumption would not alter significantly, leaving a structural fiscal gap that would need to be addressed through borrowing or taxation.
