A prominent think tank forecasts a stark economic future for the United Kingdom. The National Institute of Economic and Social Research (NIESR) warns of significant contraction. Their report highlights a potential 3.6% shrinkage of the UK economy by 2040. This grim outlook is based on a scenario of zero net migration.
The Core Prediction
NIESR analyzed a future with no net population growth from immigration. They predict this scenario leads to a smaller workforce. Employment growth would also slow considerably. The report estimates the UK’s Gross Domestic Product (GDP) would be substantially smaller. This reduction represents a persistent drag on economic output. It means fewer goods and services produced overall. The tax base would grow at a slower rate.
Population Dynamics at Play
The projection assumes falling birth rates. It also accounts for a sharp decrease in net migration. The UK population could stop growing around 70 million by 2030. Current official figures place the population at 69.3 million in 2024. Dr. Benjamin Caswell, a senior economist at NIESR, stated this fact. Net zero migration impacts employment and the workforce size.
Short-Term Gains, Long-Term Pains
Initially, real wages and disposable income might rise. This could occur as businesses invest more in machinery. This increases productivity per worker. GDP per capita might see a 2% rise by 2040 in this specific metric. However, these gains come at a cost. Overall economic growth would be weaker. This is due to a smaller and ageing population.
Public Finances Under Strain
The long-term effects spell trouble for public finances. Fewer tax revenues would be generated. This creates a wider gap between government spending and income. The budget deficit could increase significantly. NIESR estimates this deficit could jump by £37 billion by 2040. This is roughly 0.8% of GDP. Such a scenario could force the government to raise taxes. Stephen Millard, NIESR’s deputy director, noted this pressure. The United Kingdom may not have the capacity for higher debt.
Broader Economic Implications
A growing working-age population helps fiscal sustainability. It broadens the tax base. Positive net migration supports this. Without it, the economy faces greater strain. The report suggests this trend has long-term consequences. It impacts public services and national debt. NIESR recommends proactive debt reduction. This provides a buffer against shocks. The analysis does not invent facts. It relies on detailed modelling.
Context of Migration Trends
Recent years have seen significant shifts in UK migration. Official figures show a notable decline. Net migration fell from over 649,000 to around 204,000 in the year to June 2025. This drop is attributed to policy changes. Stricter work and study visa rules play a part. Some forecasters believe this trend could lead to net zero migration soon. The ONS also reported net migration’s lowest level since 2021.
Business and Growth Concerns
The future business environment is a key concern. Slower employment growth affects the labour market. Companies might face challenges finding workers. This could impact overall business activity. The trending news highlights potential economic headwinds. This news is vital for UK business leaders. It informs future strategies.
Conclusion
The NIESR report presents a compelling argument. It links migration levels directly to economic health. A scenario of zero net migration carries risks. These include slower GDP growth and increased deficits. While short-term gains in productivity might occur, long-term prosperity faces challenges. The analysis stresses the importance of a balanced approach to migration. This ensures a robust economy for the United Kingdom. It offers critical insights for policymakers. It also affects long-term planning for citizens. This news is essential for understanding the UK’s economic future.
