Zero net migration would shrink UK economy by nearly 4% by 2040: Report
Cutting net migration to zero could shave 3.6% off UK output by 2040 and add £37 billion to public borrowing, a new NIESR report warns
 "Zero net migration would shrink UK economy by nearly 4% by 2040: Report")
Cutting net migration to zero would knock 3.6% off UK output by 2040 and increase public borrowing by £37 billion ($51 billion), according to estimates by the National Institute of Economic and Social Research.
The think tank warned that such a scenario would be fiscally unsustainable and likely to lead to major tax rises, even though it could temporarily lift real wages.
Migration is a hot political topic in Britain, with public discontent — particularly over small boats illegally crossing the English Channel — pushing Nigel Farage’s right-wing Reform UK party to the top of the opinion polls. Most voters say net migration is rising, even though official data show it has plummeted since the Labour government came to power in 2024.
Some experts predict net migration could hit zero this year after a clampdown by both Labour and the previous Tory administration. Regardless of whether it happens under Labour, Farage has signaled his ambition for the number of arrivals not to exceed departures.
NIESR’s report, published Wednesday, found that the UK’s trend growth rate would be 0.2 percentage points lower due to a smaller workforce and slower increases in employment, if net migration fell to zero. It would widen the budget deficit by 0.8% of gross domestic product by 2040, equivalent to £37 billion in today’s prices.
Immigration and asylum rose to become the top issue concerning voters last autumn, according to polling firm YouGov, and remains a high priority despite fading to second place — below the economy — in recent months.
“Any net zero migration scenario would not be fiscally sustainable for the UK unless there were significant tax rises, and significant tax rises could potentially choke off economic growth,” said Benjamin Caswell, senior economist at NIESR.
The analysis looked at a “net zero” scenario where the population stabilizes at around 70 million from 2030 onwards and the working-age population declines by 2.5 million by 2040. That was compared with a scenario using official projections that predict the population rises to 74 million by 2040.
Official estimates suggest that net migration has already dropped sharply from over 900,000 just after the pandemic to 204,000 in the 12 months through June 2025. The UK has tightened up the immigration system, raising salary requirements for skilled workers and clamping down on which migrants could bring over family members.
The earlier peak has become known as the “Boris wave,” after Brexit and Covid prompted Boris Johnson’s Tory government to relax restrictions on workers coming to the UK.
While NIESR said a net zero scenario would boost gross domestic product on a per capita basis and real wages, it is “unlikely to be sustained if they require public sector debt to rise without bound as a share of GDP.” The effects from such a shift would build over time.
“The gap opens up much, much further out in the forecast so in the short to medium term, fiscally speaking, it’s not too detrimental,” said Caswell. “As you go out 10-20 years, the gap becomes continually larger and larger so it’s something that catches up with you gradually.”
Meanwhile, in an update of its overall forecasts for the UK economy, NIESR predicted GDP growth would remain at 1.4% this year before slowing to 1.3% next year. It expects unemployment to peak at 5.4% in 2026, up from 5.1% currently.
While NIESR director David Aikman said the economy “may look normal on the surface,” he cautioned that “geopolitical strain is here to stay and we need to prepare for a bumpy road ahead.”