Since Brexit made it harder for Europeans to work in the UK, British pubs and restaurants have come to rely on labor from further-flung parts of the world. Now, Prime Minister Rishi Sunak's planned crackdown on migration is threatening to stifle that supply.

Arrivals to the UK from countries such as Nigeria, India and China have risen sharply, more than offsetting the number of departing EU citizens, and pushing overall levels of net migration to an all-time high.

"As there are less Europeans, we are seeing more rest of the world people come in," said Alasdair Murdoch, chief executive officer of Burger King in the UK. "A lot of Europeans went home during Covid and they didn't come back."

Record migration, despite the supply-side benefits, has triggered a political storm after pro-Brexit campaigners promised to control the country's borders. Sunak is gambling on the Conservatives' controversial plan to send asylum seekers to Rwanda, while stamping down on economic migration with new limits on students and the families of people who are granted work visas. Yet these are the groups who often fill hospitality jobs, as it is difficult to get a visa to work in a bar or eatery.

"We tend to employ more people doing fewer hours," added Burger King boss Murdoch, due to higher labor costs. He explained that many of his staff from outside Europe are students and so are well-suited to these jobs.. "There will be a shift to more part-time workers."

The hospitality sector has already endured one of its toughest ever periods due to the pandemic and a generational inflation crisis. Relentless train strikes and the lasting trend of remote working have also kept customers away from city and town centers, while bosses are now facing higher taxes and another sharp uplift in the minimum wage. A restriction on labor would add to the pain.

More than 103,000 EU workers left the UK's accommodation and food services sector between December 2019 - shortly before Brexit ended freedom of movement from the EU - and December 2022, according to net payroll data from HM Revenue & Customs. Over the same period, the number of other overseas staff grew by 96,900.

Proposed changes to the migration system "will reduce the pool of migrant labor that businesses can hire," said Ben Brindle, a researcher at the Migration Observatory at the University of Oxford. In early December, Sunak vowed to increase the minimum salary needed to secure a skilled work visa by a third, to 38,700 pounds ($49,000) - well above the average pay of most hospitality workers.

"Migration isn't the only way to fill vacancies, so what happens will depend on how businesses respond," Brindle added. "In theory they could improve pay to attract domestic workers or automate production, but in some cases these options won't be feasible."

Inflation

Many business owners are concerned that British people won't apply for these types of jobs, if the supply of overseas workers is limited. Fears spread down the chain to suppliers of restaurants and pubs. "For plants in the middle of nowhere, in places where they just can't recruit, they're going to have a very difficult time," said Nick Allen, chief executive of the British Meat Processors Association.

"They're faced with the decision: you incur huge extra cost or actually you tailor your business down, to fit the workers that you can get hold of. It could have some quite dramatic effects, and what the government should understand is whichever way that goes is going to create inflation."

This spells a headache for Sunak, who has said a general election is likely in late 2024 but is far behind the opposition Labour Party in polls. Inflation is still double the 2% target, and Bank of England policymakers are worried that a tight labor market and rising wages are boosting domestic prices. Limiting the labor supply could be risky.

Allen, whose industry has been hit particularly hard by a lack of UK workers, said it was unrealistic to assume businesses could pay British people more. Due to the specialist skills required, many meat processing plants have been able to recruit workers from abroad under the UK's "skilled worker" program. The Philippines has proved to be a "good hunting ground for us," he said.

But this is expensive. Allen reckons the cost of recruiting and hiring Filipino workers - paying for their visas, travel and so on - averages out to 5,000 pounds per year over the length of their employment. That's over the domestic rate of pay.

"You just would not be doing it if it was just a simple matter of offering higher wages - you just cannot find the people to do the work," Allen said. The new minimum salary for migrant workers of 38,700 pounds is far higher than the going rate, Allen added, leaving many executives in the meat industry scratching their heads.

Food and Drink

The problem will be felt across other areas of the food industry. In December 2020, 67% of staff at one large casual dining chain were British, 16% were from the EU and 11% were from the rest of the world (the remainder were unspecified). By December 2022, the rest-of-world proportion had risen to 19%, while the EU share had dipped to 9%.

Ian Cass, managing director of the Forum of British Pubs, said there were fewer EU staff employed in bars across the UK since Brexit, and their departure was being felt most keenly in kitchens.

Britons haven't been rushing in to fill the gaps, he added. Although demand for staff is high, it varies greatly by locality and changing drinking habits mean many pubs are closing earlier than in the past. "You probably need workers on less hours, and they're making less money," Cass said. "So that also has proven a difficulty to getting people into the hospitality industry."

Most pubs, he added, could not afford to pay staff more. Cass called for immigration restrictions to be loosened on catering staff looking to work in the UK, if only during busy periods over the summer. "They ain't going to be making a 30-pounds-odd-grand salary," he said.

The hospitality industry "has been working hard to make itself a more attractive one for people to join, with salaries up 13% on average in the last year," said Kate Nicholls, chief executive of trade body UKHospitality.

Population Growth

In a recent lecture hosted by conservative think-tank Bright Blue, Alan Manning, professor of economics at the London School of Economics, said it was right to reduce net migration. Current levels had put the UK's population growth on an unsustainable trajectory, he said.

Businesses hiring workers who were in shortage should be encouraged to increase salaries, he added, rather than being allowed to import staff on lower wages - though he said the salary threshold for migrants of 38,700 pounds was too high.

"We need to ask more often than we do why we have shortages," Manning said. "Almost always, when we get into the lower-paid, lower-skilled jobs, the reason for shortages is not that we're short of people who are able to do these jobs. We're short of people in the local economy who want to do these jobs. That's because of poor pay and conditions."

The sentiment is not always shared by business leaders. "What the government doesn't take into account is, once you bring people in at that 38,700 pounds rate, everyone around them will want and expect to be paid the same amount," Allen said. "The government seems to announce these things and quite frankly, it feels like they're making it up as they go along."