Investors should be cautious about putting their money in the UK at the moment, because Prime Minister David Cameron’s anti-immigration comments create uncertainty, an analyst warned.
“Investors hate uncertainty and they would be right to be nervous at the high-risk game of poker that Prime Minister David Cameron is choosing to play on immigration,” Tom Elliott, International Investment Strategist at deVere Group, said in a statement.
He advised that investors should “probably look towards short UK assets, whether equities, government bonds or property.
“Migration into the UK, from the EU and elsewhere, has been disruptive but has also been a major contributor to overall economic growth over the last 20 years by boosting both demand and the skills level of the workforce.”
In a country with “deep structural labour market problems” which affect productivity gains, migration is needed; limiting immigration from the EU, whether Britain leaves the union or not, will slow economic growth and investment returns, Elliott also said.
“Almost everyone will feel tighter restrictions on immigration: skilled industries will not be able to hire and to grow, meaning a smaller tax base with which to support welfare payments,” he added.
Incidents of discrimination and incitement to racial hatred have become more frequent in the UK, which until not long ago was considered a fairly tolerant and diverse society.
Many of these have been directed against eastern Europeans. Under treaties the UK signed with the EU at the turn of the century, the country has gradually lifted restrictions on eastern Europeans’ right to work and live in Britain.
This has been accompanied by increasing anti-immigration rhetoric in the media and from some politicians, especially after the financial crisis.
Recent research shows that the UK media portrayed Romanians mostly as criminals before they gained the right to work in Britain without needing government permission at the beginning of this year.
Earlier this year, the government shied away from condemning comments by extremist party UKIP leader Nigel Farage as racist, after he said he would be wary of Romanians moving next door.
The comments were condemned as a “racial slur” by the opposition Labour leader Ed Miliband.
Last year, a racially-motivated attack on two Romanians in Brighton prompted the Romanian ambassador to warn that the “inflammatory rhetoric” was turning the UK into an unsafe place for foreigners.
Cameron has floated the idea of introducing new restrictions on migrants from the EU, something which German Chancellor Angela Merkel is said to have rejected as incompatible with the four fundamental freedoms that the union guarantees: the free movement of goods, services, capital and people.
“By promising to curb immigration from the EU, Cameron has made a promise he cannot keep unless he campaigns for withdrawal of the UK from the EU in a future referendum. This will make exit more likely,” Elliott said.
A report released on Wednesday showed that immigrants from the EU pay more in tax than they receive in welfare.
This chimes with data released by the ONS on Tuesday showing that EU migrants are more likely to be employed than the UK-born population.
Of the EU migrants into the UK, the most likely to be employed were the Poles, followed by the Irish and the Germans.