June 3 2008 – EU migrants head out - UK Economy takes a hit as
By Luke Baker Reuters -
LONDON (Reuters) - For years, the flow of migrants from eastern Europe was said to have buoyed Britain's economy, providing cheap labour that kept costs down -- Polish plumbers became a byword for efficiency and affordability
But now that Britain Inc. is going through a rough patch, with economic growth slowing, the credit crisis biting, and sterling weaker, some migrants are filtering back home and that's having a knock-on effect on the economy, experts say.
The latest evidence comes from the Royal Institution of Chartered Surveyors (RICS) in a survey looking at the rising cost of home improvement and building work -- a sector that has traditionally attracted a large number of European migrants.
According to the survey, costs have risen by a fifth over the past two years as more expensive raw materials and transport, coupled with a shortage of skilled, low-cost tradesmen, have driven prices steadily higher.
"No longer can homeowners pick and choose from the glut of quality EU tradesmen as the number of central and eastern European nationals returning to their native countries is on the rise," said RICS's Building Cost Information Service.
"With half of the estimated one million British-based Poles having already left Britain, competition for labour is pushing up costs."
The Home Office says more than 700,000 eastern Europeans have registered to work in Britain since the EU expanded in 2004.
There are no precise figures on how many have since left, but anecdotally tens of thousands have returned as conditions in Britain become tougher and opportunities improve at home.
At the same time, surging oil prices have driven up fuel and transport costs, and demand for raw materials globally is at an all-time high, with emerging markets like China and India snapping up all the resources they can lay their hands on.
TIGHTER TIMES
As a result, the Building Cost Information Service says, British roofing costs have gone up by 26 percent, plumbing work by 22 percent and painting by 17 percent in the past two years.
That is feeding into inflation, which in Britain is hovering at 3 percent, a percentage point above the Bank of England's target, and also having an impact on the housing market, which is already suffering from the impact of the credit crunch.
Homeowners are having to spend more to do up their homes, but can't then pass those costs onto new buyers since the housing market has dried up and prices are falling.
From a policymaker's point of view, the hope is that slower economic growth will tame inflationary pressures without interest rates having to rise, and that lower interest rates will eventually loosen the credit crunch, restimulating growth.
That could all take some time. In the meantime, conditions are tough, not just for homeowners and for new migrants looking for work, but for the businessmen running building companies.
"The economic downturn has really had an impact," said Andrew Shepherd-Prince, co-owner of a building and decorating firm based in southeast London.
"People aren't buying new homes and they're not doing anything up, not like they were a year or 18 months ago."
As for labour, he says there's still plenty of new migrant labour around, but you have to pay more for quality workers
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