The UK economy would be 3.6% smaller by 2040 if net migration fell to zero, forcing the government to raise taxes by £37bn to cover a widening budget deficit, according to the National Institute of Economic and Social Research (NIESR).
The thinktank said that falling birth rates and a sharp drop in net migration last year prompted it to model a scenario where net migration reaches zero by the end of the decade. Under this scenario, the UK population would stop growing at around 70 million in 2030.
NIESR economist Dr Benjamin Caswell said that while real wages and disposable income would initially rise as firms invest in automation, the overall economy would suffer from slower employment growth and a smaller workforce. By 2040, GDP per capita would be 2% higher, but the budget deficit would increase by about 0.8% of GDP, equivalent to £37bn.
“Zero net migration leaves the economy 3.6% smaller by 2040 and this reflects slower employment growth and a smaller workforce,” Caswell said. He added that unless the fertility rate picks up, zero net migration would not be fiscally sustainable without significant tax rises, which could choke off economic growth.
The forecast follows a fall in net migration from 649,000 to 204,000 in the year to June 2025 after visa restrictions were tightened. NIESR noted that further measures by the Labour government on foreign workers in health and social care could reduce migration even more.
