The UK government’s ambitious immigration reforms risk harming economic growth and deepening the country’s skills crisis unless matched by a fundamental overhaul of the domestic training system, leading business groups have warned.
Following Prime Minister Sir Keir Starmer’s announcement of a “comprehensive plan” to reduce immigration, the Institute of Directors (IoD) said the proposals could worsen already critical labour shortages across key sectors.
Alex Hall-Chen, principal policy adviser for skills and employment at the IoD, said: “These plans risk damaging already fragile economic growth by further limiting employers’ ability to fill urgent skills gaps. For this strategy to work, government must deliver on its pledge to more effectively link the skills and immigration systems and incentivise employers to invest in training programmes for the domestic workforce.”
Under the new plans, migrants entering the UK on all visa types will face tougher restrictions, with Starmer pledging that overall numbers will fall. But business leaders say that without swift reforms to how domestic workers are trained, these measures could leave employers without the skilled labour they need to compete and grow.
Stephen Phipson, chief executive of Make UK, the manufacturers’ organisation, said many firms only turn to overseas recruitment because of chronic failings in the UK’s domestic training pipeline.
“The apprenticeship levy, as currently structured, has been disastrous. It has made it harder, not easier, for companies to access the training they need,” Phipson said. He called for the government’s forthcoming industrial strategy to include a clear, urgent plan to build up the UK’s technical skills base, warning that “in the face of a crisis, the response must be significant, structural and fast.”
The British Chambers of Commerce echoed these concerns. Jane Gratton, deputy director of public policy, supported the overall objective of reducing the UK’s reliance on immigration but warned against acting too quickly.
“It’s vital that the pace of change in the immigration system does not cut off access to global talent before the UK’s wider labour market problems are properly addressed,” she said. “Firms need access to the right skills — and for some, that will include hiring internationally when local recruitment fails.”
The Confederation of British Industry (CBI) has also raised red flags, particularly over further restrictions on student visas, which it says could jeopardise university finances and reinforce damaging narratives around the use of migrant workers.
“The reality for businesses is that it is more expensive and difficult to fill a vacancy with immigration than if they could hire locally or train workers,” said Rain Newton-Smith, CBI chief executive. “Labour shortages can’t be solved by training alone. With the UK’s workforce set to shrink in the coming decades as our population ages, it’s more important than ever that we support the business investment needed to underpin tech adoption and training.”
The government’s proposals are being closely watched by business and policy leaders alike. While ministers have been clear on the need to reduce migration, the consensus among industry voices is that doing so without addressing structural flaws in skills policy could weaken, rather than strengthen, the UK’s long-term economic resilience.
