Small firms say points-based immigration system can work if costs kept down and right visas in place

Close to four in ten (38%) small employers have struggled to recruit the right staff over the past year, with more than a third (35%) of these citing the unwillingness of UK citizens to work in their sector as a reason for this struggle, according to the latest study from FSB, published today.

Half (48%) of small firms state that they would be unable to meet the immigration fees currently levied on employers when they hire non-EU staff should they be extended to all workers from around the world. Previous FSB research shows that 95% of small firms have no experience of using the UK’s current immigration system.    

Four in ten (41%) small firms that operate in the professional, scientific and technical services sectors have engaged EU contractors. A similar share (35%) of small firms operating in the information and communication industries have done so.  

The new report follows the release of a government policy paper confirming that the UK will move to a points-based immigration system from January 2021.

As part of the new report, FSB recommends that the future points-based system: 

-      Keeps the cost of hiring EU and non-EU staff to below £1,000 for small businesses and exempts smaller firms from the Immigration Skills Charge (under the current system, the cost of a Tier 2 visa sponsorship to a small employer exceeds £3,000, a fee that would be unrealistic for the smallest firms).  

-      Includes a special visa for social care workers to help address the severe personnel shortages in that sector – acknowledging the fact that it will take 15 years to train enough UK citizens to address that shortage – and pilots a visa for remote communities that struggle to recruit talent, including those within popular tourist destinations.    

-      Includes a Global Talent visa which allows the self-employed to come to the UK without a job offer; removes any unreasonable barriers to UK entry for overseas contractors who bring flexible access to sought after skillsets.

-      Encompasses an urgent review of the Innovator Visa, which has been granted to just 14 individuals since its introduction last year.

-      Is fully tested and is able to meet the needs of small firms before it goes live.

FSB National Chairman Mike Cherry said:

“A points-based model can work, provided costs are kept down and systems are easy to navigate for small firms – the overwhelming majority of which have no experience of hiring a non-EU worker.

“Against a backdrop of weak economic growth, record employment and an ageing workforce, it’s critical that we get this new system right, particularly when timeframes are so tight. Otherwise, we risk business closures.  

“While it’s encouraging to see the Government acknowledging the need to address skills shortages in certain industries, its policy statement includes no mention of the social care sector.

“That’s why we’re proposing a dedicated social care visa, enabling those struggling with mounting overheads and personnel shortages to recruit the overseas talent they, and our society, need to thrive.

“While there are no current plans for a dedicated route into the UK for the self-employed, we look forward to working with the Government to ensure the flexible access to specialist skills that overseas contractors provide is protected.”

The new report finds that more than one in ten (11%) small firms will have to radically change their business model or close altogether if they struggle to recruit EU workers in future.

When asked about potential responses to such a scenario, a very small proportion say they would invest in machinery, IT processes or automation (5%), while a similar proportion say they would invest in training their existing workforce (8%).  

FSB is calling on the Government to:

-      Use the upcoming Budget to announce substantial funding to support small businesses to adopt new digital technologies and automate; ring-fence a significant proportion of the £3 billion National Skills Fund for use by small businesses.

-      Revamp and expand the Migration Advisory Committee to include employers, economists and academic representatives from all regions and nations of the UK who are in a position to consult on the new system as it develops.  

-      Expand the scope of what is defined as Research and Development (R&D) activity to enable more small firms to benefit from R&D tax credits; deliver on its promise to substantially invest in the UK’s broadband network.  

Mike Cherry added:

“Small firms want to upskill their workforce, improve productivity and bring through the next generation, but they need support to make that happen.

“It’s critical that the upcoming Budget and Spending Review are seen as an opportunity to enable more small businesses to adopt digital technologies and automate.

“Equally, a meaningful share of the National Skills Fund should be earmarked for use by small businesses – enabling them to improve the skillsets of their existing workforce will be key to closing our productivity gap.  

“With costs mounting – not least those linked to business rates, employment and compliance – the vast majority of firms are not in a position to put substantial funds towards investment. We look forward to working with policymakers on how we can increase take-up of automation and innovation within smaller businesses.

“Infrastructure more widely is vital in this space too, and delivery of this Government’s broadband commitments will be integral to closing our productivity gap.    

“Ultimately, we need an immigration system that responds to the needs of our economy. A re-vamped Migration Advisory Committee should work closely with those at the business frontline when deciding on how our immigration system evolves.”


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