BREAKINGVIEWS-No-migration economies demand big investments

By Jon Sindreu

LONDON, Feb 6 (Reuters Breakingviews) - With the United States and the United Kingdom increasingly curbing population inflows, the idea of “net zero migration” may become a reality. These policies have well-known immediate problems, including violent immigration raids in the U.S. and a shortage of foreign-born health workers in Britain. But there is also a less obvious, long-term danger: governments may neglect the investment needed to support a faster ageing society.

This week, the National Institute of Economic and Social Research (NIESR) published an economic forecast for a UK population that stops growing and then plateaus at around 70 million from 2030 to 2040. It’s plausible: in 2025, British births roughly matched deaths, and net migration fell to its lowest level since 2020. That was largely due to tighter work visa controls imposed by the government, under pressure from the anti-immigration Reform UK party’s poll rise. NIESR estimates such stagnation would leave GDP 3.6% smaller by 2040 than under official projections of 74 million people. Crucially, however, GDP per head would be 2% higher, relative to the alternative scenario.

It’s counterintuitive. Even if immigration’s gains are not always widely shared, like in Spain, most research still finds that the gains exist, thanks to greater economic dynamism and a broader tax base. Yet NIESR’s results reflect a likely outcome: stopping migration shrinks the future workforce far more abruptly than it curtails corporate investment. Also, firms have an incentive to use machines and artificial intelligence rather than pay higher wages to scarce workers, which should boost productivity growth.

Nevertheless, ageing becomes a problem further down the line, with immigrants no longer providing a fresh supply of working-age citizens. NIESR points out that the extra welfare commitments would lead Britain’s budget deficit to start widening quickly after 2032, because of the burden of supporting so many retirees with a smaller number of tax-paying workers.

Those fiscal concerns could be addressed with higher taxes. But growth could also disappoint. After initial labour shortages, which might boost productivity, firms would eventually face shrinking markets for their goods and services. Consumer and government spending would shift toward sectors that are harder to automate, like senior care. The result, research by the International Monetary Fund suggests, is that companies will eventually slow the pace at which they invest in capital per worker, denting productivity.

To be sure, economists Daron Acemoglu and Pascual Restrepo have found that older societies invest more in robots to compensate, but this doesn’t happen automatically. Whereas the U.S. can hope the AI boom delivers, countries with weaker industrial and technological bases will struggle. That includes Britain, which has been starved of capital spending since Brexit, and rapidly deindustrialising Europe. Without ambitious government policies to bolster business investment, anti-immigration proposals may not add up.

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CONTEXT NEWS

The American population increased just 0.5% between July 2024 and July 2025, which was the slowest pace since 2021, figures by the U.S. Census Bureau showed on January 27. This was the result of a net international migration falling to 1.3 million from 2.7 million in 2024. Trends suggest it will drop to 321,000 by July 2026.

In the United Kingdom, stricter work visa requirements have also served to shrink net migration numbers. Recent estimates suggest they were around 200,000 in 2025, which excluding the pandemic dip would be the lowest since 2020. This figure peaked at over 900,000 in 2023, the highest level on record. A new BMG poll for The i Paper published on January 31 showed anti-immigration party Reform UK rising to 32% of prospective votes, with the ruling Labour Party scoring only 20%.