Lower net migration could hold back UK growth potential, OBR finds

Lower net migration in the UK could reduce population growth and hold back the country’s economic growth potential, according to new forecasts.

The Office for Budget Responsibility (OBR), the Government’s official forecaster, said its forecast for net migration was lower than it previously predicted.

It was now expecting net migration to average 235,000 a year between 2026 and 2030, down from the 295,000 it was predicting back in November.

Net migration figures show the difference between the number of people moving long-term to the country and the number of people leaving.

The OBR said the cut to its forecast was driven by more British nationals leaving the UK.

By 2030, this change reduces the adult population by around 200,000, compared to its November forecast, the OBR said.

A smaller working population pulls down on growth in the supply of labour over the next four years.

“Aggregate potential output growth is therefore marginally lower than in November, by 0.1 percentage points a year on average,” the OBR said.

It said this leaves the level of potential output 0.25 percentage points lower in 2030.

The OBR said potential output is the starting point for thinking about how fast an economy grows over the next few years.

The organisation nevertheless said there were significant uncertainties about how lower net migration will impact productivity and living standards in the UK.

In particular, it said that proposed changes to indefinite leave to remain and asylum policies were not included in its forecast because they are still being reviewed.

Helen Miller, director at the Institute for Fiscal Studies, said the forecast path for net migration will be “particularly significant” within the broader economic outlook.

“It was revised downwards today to reflect higher levels of outwards migration by UK nationals; it could shift downwards again if the numbers for inwards migration get revised down.

“That’s entirely possible, not least because bringing down net migration is explicit government policy.”