Last week two announcements were made in Britain that were strongly related to one another. The first was the budget, announced by the Chancellor Rachel Reeves. Reeves’ budget saw tax rises across the board, including a de facto rise in income taxes—something that the Labour government promised not to do. The second was the announcement that immigration into Britain had fallen nearly 70 per cent according to data released by the Office of National Statistics.
It was hard for the Labour government to frame the budget in a positive light. But they tried to spin the immigration figures as a win with Home Secretary Shabana Mahmood saying that it was ‘at its lowest level in half a decade and has fallen by more than two-thirds under this government.’ Immigration has become extremely unpopular in Britain in recent years, especially after breaking new records in the so-called ‘Boriswave’. But in fact, these figures may signal trouble ahead for the British economy.
While analysts were keen to attribute the sharp fall in immigration to new restrictive policies put in place by Labour, the deteriorating British economy is far more likely to be the true cause. The following chart shows the relationship between job vacancies and net migration in Britain for the last 23 years. The blue dots are the years of very high unemployment between 2009 and 2013. As we can see, if we exclude periods of very high unemployment, the relationship between job vacancies and unemployment is very strong.
The black dots on the chart are estimates for net migration and job vacancy numbers for 2025. It is clear that net migration is exactly where we would expect it to be given the current weak jobs market in Britain. The analysts who are attributing the decline in immigration to Labour policies are simply wrong: the fall in migration signals a significant weakening of the British economy. That is, the fall in migration is simply the flipside of the austerity budget that the Chancellor introduced to the public last week.
‘The fall in migration signals a significant weakening of the British economy’
Unemployment is rising in Britain. In September 2024, the unemployment rate stood at 4.3 per cent. Today it stands at 5 per cent. The economy is clearly deteriorating. This deterioration is taking place after a severe hit to British standards of living in recent years. Economically, this decline is mainly due to the sharp and ongoing rise in the cost of basic goods like energy and food. Britain currently has some of the most expensive energy prices in the world. Many feel that the inflation statistics are not adequately capturing the cost of essentials like food. People in Britain are starting to complain that they cannot afford their weekly shopping with the costs having risen 50–100 per cent in the past few years.
But even these numbers do not capture the sense of decline that is rampant in the country. People are beginning to notice that basic public services are no longer functioning properly. Delays at major airports are now so common that people travelling to and from Britain regularly factor in expected delays in their overall travel plan. Trains across the country are regularly rerouted and subject to major delay.
All this explains one of the most worrying aspects of the latest migration figures in Britain: the gradual increase we are seeing in native Britons leaving the country. Some of these people are no doubt leaving because the living standards are falling rapidly. But some are leaving because they believe that the country is close to bankruptcy and so the government is going to hike taxes on higher earners. This ‘millionaire exodus’ that is now well-advanced threatens to destroy the long-term tax base of the British economy.
Some hope that if Reform UK win the next election that the situation will get better. But the reality is that Britain’s problems are structural. The country is in terminal economic decline, and the state is close to bankruptcy. Any plan to reverse this decline would have to be comprehensive and would take years—likely over a decade—to have an impact. Reform has no such plans. No one does. The political debate in Britain seems almost designed to distract voters from how deep the problems are. The obsession on the right about ‘migrant boats’—which account for less than 2 per cent of inward migration into Britain—for example, was recently revealed to have been at least partially whipped up by foreigners trying to monetize social media posts, a technique that has become known as ‘rage-farming’.
The grim reality is that Britain is one recession away from a major economic collapse. The fiscal deficit currently stands at over 5 per cent of GDP. As shown by Reeves’ budget, the government can barely finance this deficit. If, or rather when, a recession hits, tax revenues will fall, and unemployment claims will rise. This would likely send the fiscal deficit up to levels roughly like what Britain saw in the pandemic and this, in turn, would lead to an immediate borrowing crisis. At that point, it seems probable that Britain would have to approach the IMF for a bailout and engage in an austerity programme that would be like the one imposed on Greece in the wake of the last recession.
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