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Call us for a chat on +44 (0)20 7836 3678 or Email Jim Piper or David Newman

Immigration and the UK economy: new people = new business opportunities

There has been a lot in the media recently about immigration so, working as I do in business development, I thought it would be interesting to look at the facts from a business development perspective.

The last 10 years has seen a huge increase in the population of the UK. In the 8 year period 2004 to 2012 the UK population grew by 4 million. To put this in perspective it had taken 33 years (1971-2004) to add the previous 4 million.

Fertility rates in the UK dropped below replacement level in 1973 and historically more people have left the UK than arrived so population growth towards the end of the century was due to a declining death rate resulting in an aging population. Had this trajectory continued into the 21st century then, like many other developed countries, we would be heading towards population decline and a population pyramid that resembled a mushroom with so great a proportion of the population over 60 years of age, not working and placing a disproportionate strain on health and other public services. Italy and Japan are among the countries that are already shrinking.

The outlook for the UK is now very different however. Enlargement of the European Union in 2004 heralded the arrival of thousands of immigrants from Eastern Europe. ‘Brand UK’ has several strong points; the English language, a reputation for tolerance and fairness and (in the mid-noughties) a growing economy. Since the recession immigration from Eastern Europe has slowed a little but more people have come from the struggling economies of southern Europe. Since January of this year restrictions have been lifted for people wanting to come to the UK from Bulgaria and Romania.

This means the immigration debate has been reignited in the past few years. A minority may feel they have been impacted negatively by immigration, still more people will fear that they could be affected and hysterical headlines in some sections of the media have not helped dispel these ideas. Neither have politicians of all parties since the recession started. This has contributed to some deeply entrenched myths around immigration.

The facts are however that immigration has contributed massively to UK Plc and will continue to do so. Recent arrivals from Europe have been net contributors to the UK economy, paying 34% more in taxes than they have received in benefits (UK natives, on average are net receivers of government expenditure contributing just 89% of what they get back).

The UK is destined to become the most populous country in Western Europe by 2050 with 77 million people compared to 71.5 million in Germany. This is a huge shift. The UK hasn’t been the biggest economy in Europe for over 100 years and until recently no one was predicting we would overtake Germany ever again, never mind within a generation or two. This will greatly impact on how the UK is perceived, particularly in Europe and will have an impact on UK firms. It has been often noted that we don’t have a Google, Facebook, or Apple. Like GM, Ford and GE last century, these companies have all benefited from being born in the world’s largest economy, an economy so big it can spawn centres of innovation like Silicon Valley and offer inspiration and incubation to so many firms that some inevitably become giants.

Immigrants are more likely to be young, well-educated, determined and ambitious. They possess skills the UK needs. An English hospital, never mind premier league team, would be an inferior proposition without skilled workers from overseas. A look at the key founders of the 3 tech giants mentioned above will reveal that none of their ancestors were on the Mayflower. Immigration has been a driving force behind innovation and growth in the USA since 1492.

So the opportunities for UK firms are surely significant. For a UK company, the arrival of economically active consumers is ‘new business’ in the purest sense of the phrase. A chance to capture overseas market share without having to go overseas. The UK has literally been importing customers for UK companies to sell to – at the rate of a large city’s worth every year.

The demographic profile of recent immigrants includes a high proportion of 18-34 year-old’s with no kids – a period I remember fondly for the disposable income. In marketing terms, these are super-consumers.

As far back as 2009 Tesco was selling over 200 products aimed directly at the Polish population but they were almost all sourced from Polish manufacturers. The low cost airlines have increased routes to Eastern Europe compared to 10 years ago. Some pubs now sell Polish beer but these are all examples of companies responding to demand. I wonder how much UK companies are doing to actively generate demand and market themselves at recent arrivals to the UK?

The opportunities actually extend beyond the immigrants here right now. Recent immigration from Europe has been more transitory than used to be the case with some returning home for good or becoming ‘boomerang workers’, working on and off in the UK. The total number of people (and I’m not including tourists) to have experienced UK life AND brands in the past 10 years is a good deal more than the considerable number of people residing here today. There are almost half a million overseas students living in the UK. Many will stay and make a significant contribution to the UK economy but many will return home or move elsewhere, hopefully with fond memories of their time in the UK and surely a taste for some UK goods or services.

A look at the top two countries where immigrants are coming from right now is interesting – China and India. Two economic giants for the 21st Century (and the USA is the 4th biggest source of immigrants). The UK government and ‘big business’ delegations have been to both countries recently to drum up demand for British products but could firms be doing more to get people ‘hooked’ while they’re here in the UK? A large number of Chinese and Indian immigrants are overseas students – these are the elite of their countries and will be the opinion formers and influencers of the future so their business is particularly valuable.

London isn’t the 6th largest French city (as has been quoted by some) but it is home to a significant number of wealthy people from Western Europe, the USA, Russia, Middle East and Asia. We are forever hearing about the impact at the very top end in terms of oligarchs and property values in Kensington, but what about the thousands that have come here to work in our financial and creative industries? Some will return home later in life but will they take a love of British products with them? And if they do, will they be able to find Marmite on every French high street or PG Tips in a US convenience store? And while they are here are UK companies doing enough to make sure they can buy the kind of goods they miss most from home?

So it seems that our recent experience of immigration has delivered a double-whammy in terms of opportunities for new business development. In both senses of the phrase:

New businesses will be formed and new arrivals to the UK will make a major contribution with the different ideas and experiences they bring. Niche businesses to serve growing communities of foreign born people will emerge to meet new demands.

In the second sense (sales growth) of the phrase, this influx of economically active people represents new customers to sell to, whether you’re a blue chip or a chip shop.

I would love to hear from any marketers or marketing agencies that have run campaigns aimed at capturing the immigrant pound in the UK or reached out to ex-immigrants who have returned home.

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