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Migrants workers 'keep interest rates down'. By Dan Martin

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24th Apr 2006
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Immigrant workers from eastern Europe are boosting UK economic growth by helping to keep interest rates down, closely watched research shows.

Ernst & Young's Item Club, which monitors the economy based on the Treasury's own model, said without the arrival in the UK of 300,000 migrants over the last three years willing to work in low-paid positions the cost of borrowing would have hit 5% rather than the current 4.5%.

Skills gaps in several industries have been plugged as a result particularly agriculture, hospitality and catering.

E&Y said the fact that the UK was one of only three EU countries to immediately sign up to freedom of movement of labour in 2004 is helping to drive economic growth.

It predicted GDP growth to rise to 2.6% in 2007 and 3% in 2008. This will be the case, the ITEM Club forecast, even if interest rates stay at 4.5% which it said they will until at least the end of this year.

Professor Peter Spencer, chief economic advisor to the ITEM Club, said: "We are on the crest of a new immigration wave. The steady flow from the most recent accession countries to the UK has proved remarkably positive for the economy, keeping interest rates a half a per cent lower than they would otherwise have been.

"As a direct result the UK workforce has become younger, more flexible and economical, easing the pensions burden and keeping interest rates lower than many commentators could have predicted. Even with a modest rise in unemployment numbers we are looking at a very favourable cost-benefit ratio."

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