Net zero migration: smart economics or short-sighted strategy?

British industry is already feeling the strain of Labour’s restrictive immigration curbs, and a move to zero net migration could exacerbate this.

The Home Office continues its determination to reduce migration as last week’s Statement of Changes to the Immigration Rules made clear, with tightened salary rules for sponsored workers and the first ever nationality-specific ban on student visa applications. Although the Home Office states this will be a temporary measure, does this now open the door to future visa bans based on nationality rather than skills-based requirements?

Falling migration numbers

Tougher restrictions have already been imposed on foreign students (who account for 45% of all UK entry visas and nearly 23% of all higher education students), sending the number of university applications from abroad tumbling. A November 2025 survey revealed that 61% of UK universities reported a decrease in international postgraduate enrolment for the 2025/2026 academic year, with foreign enrolments down 6% year-on-year. 

Similarly in the care sector, the number of health and care visas granted to international care professionals has fallen to a historic low. Just 1,062 individuals were successfully recruited from abroad in the second quarter of 2025. In July 2025, the government closed the care worker visa scheme to new overseas applicants, effectively ending overseas recruitment of care workers. For those already in the UK the situation remains precarious. Tightened salary rules and more Home Office scrutiny of company payrolls for infringements resulted in more than 1,500 employers in the care sector being stripped of their sponsor licence between October and December 2025 – triple that of the previous quarter.

These policy changes and increased enforcement all align with the direction of the government towards radically lowering immigration and with it, the increasing possibility that the UK could move towards a net zero migration scenario. This would be welcomed by Westminster in the short term, where migration has become so politically sensitive, and might potentially staunch the flow of traditional Labour voters towards Reform.  But in a country with a falling birthrate and an ageing population, this could have serious implications for the economy.

The costs of net zero migration

The immediate and most obvious consequence of cutting off the migration pipeline is the gaps in the workforce which need to be plugged in those industries which have been historically reliant on overseas recruitment: currently there are 100,000 vacancies in the NHS, a further 110,000 in the social care sector, a 25% labour shortage in construction. But beyond this acute labour shortage, the contraction of the working age population could have a significant impact on the UK economy as it would lead to lower tax revenues.

In March last year, the OBR predicted that a figure of 300,000 net migration would increase UK tax revenue by £6 billion by 2028-9. A report out last month by the National Institute of Economic and Social Research (NIESR) went further, predicting that was net  migration to fall to zero, it would leave the economy 3.6% smaller by 2040, resulting in a £37bn deterioration in public finances, with a smaller and ageing population producing fewer tax revenues. This would require the government to raise taxes to plug a growing funding gap in the long-term. Benjamin Caswell, a senior economist at the NIESR, has stated that: "Any net zero migration scenario would not be fiscally sustainable for the UK unless there were significant tax rises, and significant tax rises could potentially choke off economic growth”.

The government acknowledges that not all migrants contribute equally to the economy and claims that increased salary thresholds and changes to Indefinite Leave to Remain (ILR) will prioritise high-skilled workers who will contribute to taxes while not being a drain on public services. However, the Migration Advisory Committee report in December 2025 cautioned that the use of salary thresholds for visas is a blunt instrument which can unintentionally exclude younger workers who would be strong long‑term fiscal contributors.

But for now at least, it seems the government is keen to close down migration channels. If doing so, it will also need to turn to the 6.5 million working-age British people who are not in work and find a way to encourage them to plug the gaps the departing migrant workers have left behind.