High taxes and 'no future' spark fears of mass exodus of young Britons




  • In Business
  • 2022-11-27 06:00:00Z
  • By The Telegraph
Brain Drain - Anadolu Agency
Brain Drain - Anadolu Agency  

Feelings of being overworked and underpaid prompted Rachel James, 29, and her partner to leave their jobs as doctors in the NHS to move to Australia. Two years later, the couple have no plans of returning.

"The pay is between double and triple what we would get in the UK," Rachel (not her real name) says. She lives in Cooktown, a coastal town a four-hour drive north of Cairns. They enjoy free accommodation because the Australian health service offers incentives to people to work in rural areas.

The biggest difference is in the quality of life. Unlike in the British health service, the couple's work rotas are linked so they can have days off together.

"In the UK, when I was working as a doctor I struggled a lot in my foundation years with anxiety. I did mindfulness. I did exercise. I saw my GP. Nothing has ever done more for my mental health than having money left over in my bank account at the end of the month and being able to spend time with my partner," she says.

Rachel and her partner are among thousands of UK medical graduates who leave to go abroad every year. While this type of brain drain has typically been limited to specific occupations, life in the UK is about to get tougher for young people across the board.

Real incomes are falling, taxes are rising and buying a home or starting a family is getting increasingly unaffordable. Scores of highly skilled workers - many of whom are already working remotely - may soon wonder whether they too would be better off somewhere else.

The political and economic turmoil of the past months has filled newspaper columns with comparisons of the UK and Italy.

The Economist magazine controversially ran a front page saying "Welcome to Britaly" with short-lived prime minister Liz Truss pictured as a British-Italian mash-up of the Statue of Liberty. The magazine said that both countries shared "terminable political drama, economic stagnation and nervous bond markets".

But one feature of countries such as Italy, Spain and Greece, whose economies were badly wounded after the financial crisis, is just how many of their young can be found in Britain and elsewhere. The number of Italians and Spaniards in the UK more than trebled in the decade or so after the financial crisis, while Greeks more than doubled.

The UK is expected to suffer the highest inflation and the deepest recession among the G7 countries, according to the OECD. Real incomes are predicted to fall by a record 7pc over the next two years, according to the Office for Budget Responsibility. Pensioners will however not feel the same hit, as the Government has decided to honour the triple lock and uprate state pensions in line with double-digit inflation.

In many ways, life in Britain will likely get more difficult. Working people will have to pay higher taxes to fund services for a growing elderly population, as the labour force is shrinking. But young people were already dealt a bad hand, with low growth and high house prices putting milestones such as owning a home and starting a family out of reach.

But will it get bad enough to send Britain's best and brightest abroad in search of a better life?

A mass exodus

The answer is not straightforward - and there's little consensus among experts. In certain industries, the UK is already experiencing a brain drain. Some analysts say that global labour shortages and the rise of remote working mean that this phenomenon could spread more widely among highly skilled workers.

The trend has so far been most pronounced in healthcare, which is known to have a highly mobile workforce. Falling real pay and worse working conditions than in other wealthy countries mean it has been an issue for several years, according to experts.

Figures from the General Medical Council show that nearly 10,000 doctors left the UK medical workforce last year. Previous analysis indicates that around half plan to move overseas, the GMC said.

"Brain drain is a nice term but it's more than that. It's an exodus, a mass exodus of not just doctors but healthcare professionals," says Dr Latifa Patel, representative body chair of the British Medical Association and a junior doctor herself.

"If you put it in the context of what we're lacking in the NHS at the moment, it's even more worrying. NHS England alone has 132,000 unfilled vacancies. Between 10 and 15,000 of those are doctors," she says.

According to Patel, doctors typically emigrate to other English-speaking countries such as Australia, New Zealand, the US and Canada. Their pay has fallen by 30pc in real terms since the financial crisis, she says.

Brain Drain - Anadolu Agency
Brain Drain - Anadolu Agency  

It's not just about money though, she says. The workload and quality of life are possibly even more important. This is echoed by Rachel James' experience who left for Australia.

"If I had thought [the NHS] would change in any reasonable time frame, we wouldn't have made the decision to be here," she says.

There is a lot of research on immigrants to the UK but what do we know about the ones who leave? "Not a huge amount to be honest," says Madeleine Sumption, director of the Migration Observatory.

"We don't know that much about who they are or what they're doing when they're overseas. We have some figures from the US and Australian visa data, for example, showing that a fair number go to other English-speaking countries," she says.

The image of UK emigration mainly being made up of retirees swapping Manchester for Mallorca is incorrect, according to Sumption. It's much more likely to be young people with few responsibilities and ties going elsewhere. While there are some visa schemes for unskilled labour, many leaving are likely to be highly skilled to qualify for immigration rights.

Overseas opportunities

UK emigres show up in immigration data in other countries but research on them is sparse and little is known about their overall skill level. Figures from the Office for National Statistics show that some 90,000 Brits left the country in the year ending in June 2022. There is no information about how many of them leave for job opportunities.

Separate data going back to the start of the 90s shows that every year more Britons leave than come back. Figures from the last three months of 2019 - meaning the latest available data not potentially distorted by pandemic trends - shows that 138,000 UK nationals left while 78,000 arrived. This is common according to Sumption - most countries see a net outward flow of their own citizens.

The UK experienced a period of almost continuous net emigration between 1964 and 1983. But rising flows of arrivals from other countries mean the UK has since benefitted from brain gain rather than drain. The limited data means that it's difficult to know how many highly skilled workers leave.

Neil Carberry, chief executive of the Recruitment & Employment Confederation, says in his experience the flight of young people abroad has not yet become a big trend but warns that working from home has made many more conscious of overseas opportunities.

"The nature of the labour market has become much more global post-pandemic," he says, "because when everybody was locked down it didn't matter if you were in Manchester or Malaga - it was still possible to do many jobs from anywhere.

"So I do think it's really important to remember… that the world is not going to wait for Britain to sort itself out. The UK has great strengths but we need to be aware that skills shortages are a global issue and other countries are looking at our talent as well."

This has been the case for freelance designer Elise, who decided to pack up her life in London this summer to move to Lisbon. At the age of 32, felt she was done with living in shared flats but couldn't afford other options. Despite having a successful career, homeownership was still firmly out of reach.

"I have come to terms with the fact that I don't feel like I've ever really be able to buy my own house. I'm also at a point where I don't really want to do like shared living anymore and rent is going up. So I felt like I might as well move somewhere else," Elise, who prefers not to use her full name, says.

After testing it out for a few months, she is now back in the UK while waiting for a two-year visa so she can move permanently. She was already working remotely in the UK.

"There's no time difference so I didn't have to tell my clients or change anything about the way I worked. I can just transport it over there quite smoothly. Obviously with the visa comes a whole other kind of tax that I need to look into as I'll be living there. But from what I've heard, it's fairly straightforward," she says.

During her first months in Lisbon, she was staying in co-living spaces where digital nomads like her have access to a workspace and can socialise together.

"It's really great because you just meet lots of people who are doing the exact same thing. Everyone was pretty much around the same age group. It was a good way to meet people and feel a little bit of a sense of community with it," she says.

Sluggish growth

Experts disagree on how likely the UK is to suffer a brain drain of highly skilled workers. Many say people tempted to leave face too many obstacles for a large-scale exodus to happen.

"If you want to go let's say to another English-speaking country, the US or Canada or Australia, you have to get a visa. You can't just say oh, I'd like to move. You'd have to get a job offer, for example. Those are quite considerable barriers," says Alan Manning, an economist specialising in migration.

While the UK is expected to experience a deeper recession than its peers, vacancies are still near record levels. Research on emigration is sparse, but a report by the Home Office from 2012 found that there is an "inverse association" between British emigration and unemployment.

"In general, as UK unemployment falls, more British people emigrate and when unemployment in the UK is high, fewer British people emigrate," it says. The report's authors suggested that while it might sound counterintuitive it was because employed people have more resources to move abroad.

This is particularly pertinent for this downturn, which is characterised by a highly unusual combination of labour shortages and recession. Many other wealthy countries are also experiencing worker shortages. This means that people in the UK are in a better position to leave than during previous recessions. This will particularly benefit people with good skills. Brexit has made it more difficult to emigrate without a job offer or a particular skill set.

"I think there are two conflicting things. One is the economic fundamentals of the UK as a place to be a highly skilled worker are very strong. So particularly in London, but also Manchester and Birmingham," says Adam Hawksbee, director of centre-right think tank Onward. On the other hand, he says, the failure to build more houses and lab space around cities means many workers and entrepreneurs are priced out.

The UK's weak productivity and sluggish growth mean young people have enjoyed much less prosperity than their parents did at the same age. From the mid-1950s until before the financial crisis, real incomes grew by 2pc a year on average. The recession is expected to cause a 7pc fall over the next two years, effectively wiping out 10 years of growth and bringing incomes back to 2013 levels. If the forecasts are correct, incomes will only have grown by 0.5pc annually in the two decades to 2028.

"Pay progression among cohorts has stalled for those born after 1980. So each five-year birth cohort before 1980 earned more than the cohort that came before them. There's not been very much pay progression at all for those born after 1980, which are the millennials," says Molly Broome, an economist at the Resolution Foundation.

The stagnation in incomes and growth has not been reflected in house prices. As successive governments have failed to ensure enough homes were built and central banks have inflated asset prices through quantitative easing, prices have soared.

Close to half of 25- to 34-year-olds owned their own home in the late 1970s to early 1990s. Today this figure has dropped below 30pc. This does not reflect a change in preference: around 80pc of young renters say they want to own a home, a figure which has remained stable over many years. First-time buyers today face property prices 5.9 times their annual salary, Nationwide data shows. This is up from 2.7 in 1983. In London, the ratio is even higher at 9.6, rising from 3.7.

Punishing tax burden

Liz Truss' fateful mini-Budget also pulled the housing ladder further out of reach for many young people, after mortgage rates soared. As a result, thousands of people have been locked into renting for longer, while demand was already well above last year's levels in every region and country of Great Britain. Rents for new tenancies are at record highs, increasing 16pc in London in the year to October and 3.2pc in the rest of the country, Rightmove data shows.

"The base of voters [for the Conservative Party] is elderly homeowners who have very few incentives to be compassionate to the young wanting new homes built near them. This is extra central for the Tories. If they don't create homeowners there isn't really much of a party left," says Robert Colvile, the director of right-leaning think tank CPS.

While he believes that the UK still has a lot to offer highly skilled workers, Colvile worries that over time highly skilled young people will be tempted to look elsewhere if things don't improve.

"Longer term there is obviously a danger that the harder it gets to afford a home, the higher your marginal tax rates get, the more expensive childcare becomes and the more people will vote with their feet. I mean, people respond to incentives," he says.

Parents in the UK also face the third highest childcare costs relative to their income among rich countries. There's little hope of respite, as services are expected to face a near double-digit real terms cut over the next few years.

"Every marginal pound that the government spends seems to go towards supporting old people. The base of tax-paying younger workers who are having to pay for this whole thing is getting squeezed and squeezed," Colvile says.

The measures announced by Chancellor Jeremy Hunt in the Autumn Statement mean the UK will have the highest tax burden since the Second World War.

Bloomberg analysis has found that the marginal tax rate - meaning how much you get taxed for every extra pound you earn - is 42pc for people earning over £50,270 and 62pc for those earning over £100,000.

Having to pay more to the public coffers makes life in the UK less attractive according to David Smith, 33, who works in financial services. He moved to Hong Kong in 2018 with his company. He planned to stay for two years - it has now been four and a half, although he will soon have to come home because of family ties.

Including bonuses, David earns £90,000 a year. In Britain, he would pay 40pc tax. In Hong Kong, the top rate is 17pc.

"To me, it feels like if you work hard in the UK and earn a good salary you are punished with extortionate taxes which makes earning over £50,000 a year pointless. I'd rather work fewer days a week and keep under £50,000 salary in the UK," David says.

In Hong Kong, he has been able to save £40,000 every year. He is also able to take his pension as a lump sum there. From his stint abroad, David will be coming back to Britain with a £340,000 savings pot to spend on his first home.

"The higher taxes you pay in the UK are extortionate. I grew up around Blackpool stacking shelves on minimum wage and then I have moved up the salary brackets. In Hong Kong, I can literally put away £40,000 a year because of the low taxes."

Growing unease

All of these things - rising taxes, falling living standards and the unaffordability of buying a home or starting a family - are ammunition for the Labour Party, which is closer than at any point in the past 12 years to getting back in power.

Keir Starmer has said he will fight the next election on "economic competence" and wants to bring down taxes for working people.

Shadow Chancellor Rachel Reeves also took every opportunity to tear into Jeremy Hunt's tax grab when delivering her speech after the Autumn Statement.

"The prospect of home ownership becoming more and more remote. And rents going through the roof," she said.

"This Government has presided over the biggest wage squeeze in centuries. This was a crisis made in Downing Street, and it is working people paying the price," she said.

There is growing unease on the Conservative backbenches too that the party is alienating young people, with several MPs speaking out against the triple lock and rigid planning laws.

But it will take considerable improvement to convince those highly skilled workers, who have already had a taste of life elsewhere, to return.

Rachel, the doctor who left for Australia, says the British system has "got it completely wrong".

"I know older people are struggling as well. I totally understand the need to improve living standards for older people. But in some areas, and certainly in terms of the NHS, those policies do come at the cost of people who are early on in their careers," she says.

"Here, there are opportunities because there is so much more room for growth. You see it everywhere, you see building and construction all of the time, new roads are getting tarmacked. In the UK there is no room for growth. It felt like there was nothing for us in the UK in terms of a future."

Unless things change fast, others may be quick to follow.

Additional reporting by Matt Oliver

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