Impact of Immigration on UK Economy

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1.Immigration and its effect in the UK economy
Introduction
Immigration can be defined as an international movement of people from one nation to
another. It enhances economic welfare through greater efficiency in labor allocation all over
the world. Currently, there are 9 million individuals in the UK who have born in abroad.
Over the past 20 years, the number of immigrants can be tripled in the UK. According to
(Wadsworth, 2017), Immigration affects the UK economy both positively and negatively.In
this essay, economic theories have been used to predict and explain how immigration affects
the UK economy over a period of time.
Impact of Immigration on the UK economy
Over the last 20 years, immigration has been undoubtedly increased the UK population from
3.2 million to 7.4 million as shown below(Shidiq, 2019):

Figure-1 Total immigration, total emigration, and total net migration(Wadsworth, 2017)
According to economic theory, immigration into a closed labor market directly affects the
structure of wages(Wadsworth, 2017). Moreover, the wages rate has been reduced with the
growth of immigration in the UK economy as shown below:

Figure-2 UK-Born wages and immigration 2008-2016(Wadsworth, 2017).
Wages of UK born and immigrants
Along with this, the unemployment rate increases in the UK which adversely affects the
lifestyle and economic status of citizens. Immigration diminishes the marginal product of
labor. In simple words, the value and demand for high skilled labor decrease due to the rapid
growth of immigration.
Immigration influences the UK economy by increasing GDP. It has been estimated that 0.5%
of GDP has been added annually by net migration of 250,000 migrants per year. Immigration
growth has a positive impact on fiscal contribution and the UK economy. According to the
Harrod-Domar economic model, domestic savings help individuals and business
organizations to provide the funds(Piętak, 2014). On the basis of this theory, immigration

plays a vital role in the development of the UK economy. It can be proved through fiscal
impact which directly affects taxpayers. The immigrants have made a positive contribution
to the UK economy as they have to pay more in taxes as compared to the welfare payments
received by them. Between 1995-2011, the total fiscal cost was £160 billion (Dustmann and
Frattini, 2014). According to the research conducted by CReAM department, the UK
government uses tax paid by European immigrants to the financing of public services in order
to increase its economic status.
The recent political trends change the impact of immigration on the UK economy. For
example, after the Brexit, EU immigration could really be restricted. After Brexit, the count
of skilled EU migrants will be decreased in the country which might restrict economic
growth. The UK government has made some changes in its existing immigration policy to
reduce 80% of EU immigrants(Wadsworth and Ottaviano, 2017).

Figure-3 the impact of immigration on the UK economy
Conclusion
In the end, it can be summarized that immigration has both positive and negative impact
onthe labor market, tax rate, employment rate, and wages structure. The UK government
should create appropriate policies to ensure that the country will be benefited from
immigration because further controls on immigration will exacerbate inequality, slow
economic growth and undermine social cohesion.
2.Does foreign investment promote the
economic growth of the host country?
Introduction
Foreign direct investment refers to direct investment into the business or production of one
country by another country. Economic growth can be defined as an increase in the production
of services and goods over a particular period of time. The main purpose of this essay is to
analyze how FDI promotes the economic growth of host country on the basis of various
economic factors such as employment, management, technology, global market,inflation rate,
price, etc.
Positive impacts of foreign investment
The impact of foreign investment on international trade of host country depends on the
motive, whether it is strategic asset-seeking, resource seeking, market-seeking or efficiency-
seeking. According to economic theory, there is a positive relationship between economic
growth and trade liberalization and export growth and foreign investment as country’s