Slashing net migration to zero would significantly shrink the British economy and necessitate sweeping tax increases or a substantial rise in government borrowing to fill a £37bn fiscal shortfall, a leading economic think tank has warned. This analysis delivers a major blow to Reform UK's immigration policy proposals.
Fiscal Unsustainability of Zero Migration
The National Institute of Economic and Social Research (NIESR), an independent research body, stated in its latest economic outlook that any net zero migration scenario "would not be fiscally sustainable for the UK unless there were significant tax rises." The institute cautioned that such a policy would "put pressure on the public finances" and worsen the nation's debt outlook.
Economic Contraction and Workforce Decline
NIESR's modelling predicts that achieving net zero migration—where the number of people leaving Britain equals those arriving—would slow employment growth and reduce the proportion of working-age individuals in the population. This demographic shift would lead to lower tax revenues, creating a growing funding gap for the Treasury.
By 2040, the analysis indicates the government would need to either:
- Raise taxes to plug the shortfall
- Increase borrowing, which would expand the budget deficit by approximately 0.8% of GDP—equivalent to around £37bn at today's prices
Comparative Economic Impact
While the think tank acknowledged that GDP growth per capita might be marginally higher under a net zero migration scenario, it emphasised that overall GDP growth would be substantially lower due to reduced employment expansion and a smaller workforce. Cumulatively, NIESR forecasts the economy would be 3.6% smaller by 2040 under such policies, effectively reducing the UK's trend GDP growth rate by about 0.2 percentage points annually.
Political Context and Migration Trends
The warning comes amid ongoing political debate about immigration levels. Ahead of the 2024 general election, Reform UK leader Nigel Farage declared net migration should be zero. Meanwhile, recent government measures to reduce legal migration have already contributed to a significant decline.
Official figures show net migration dropped to 204,000 in the year to June—a 69% year-on-year decrease—raising the possibility of Britain approaching net zero migration before 2030 according to some forecasters.
Party Positions on Migration Caps
Political responses to migration pressures vary significantly:
- Labour has declined to implement a hard cap on arrivals but has proposed measures including extending the waiting period before migrants can apply for indefinite leave to remain
- The Conservatives have suggested a "binding, legal cap" on net migration without specifying the level
- Reform UK advocates for net zero migration, a position now challenged by NIESR's economic analysis
Broader Economic Forecasts and Recommendations
Stephen Millard, NIESR's deputy director for macroeconomics, emphasised: "Unlike Japan, the United Kingdom lacks the institutional and financial conditions to support a substantially higher debt ratio." He recommended the government make concerted efforts to reduce public debt to create fiscal space for responding to potential migration shocks or other economic challenges.
In related forecasts from the same report:
- NIESR lowered its 2025 UK growth outlook to 1.4%, down from 1.5% predicted in November
- The economy is expected to slow further to 1.3% in 2027 and 1.1% in 2028 as taxes rise and government spending growth declines
- Unemployment is projected to peak at 5.5% in late 2026 before gradually declining
- Two interest rate cuts are forecast for this year, potentially bringing rates to 3.25% by end-2026 as inflation falls
The think tank concluded that maintaining positive net migration would help broaden the tax base through a larger working-age population, thereby assisting in stabilising the debt-to-GDP ratio. Reform UK has been contacted for comment regarding these economic findings.
