Fall in Migration After Brexit Could Push Up Inflation

A sharp fall in migrant workers coming to Britain as a consequence of Brexit could push up wages and cause a spike in inflation in the short term, according to the governor of the Bank of England, quoted by the Guardian. 

Mark Carney was setting out his view on inflation days after the Bank's rate-setting panel indicated it could raise interest rates for the first time in a decade.

Carney said the rapid deceleration of migrant labour could lead to shortages for employers, pushing up wage growth and inflation in the short term. However, in the long term, higher levels of immigration did not push down wages or inflation, he said.

In a speech in Washington, he said: "Abrupt decreases in migration could result in shortages in some sectors that have become reliant on migrant labour, and contribute more materially to inflationary pressures."

In the longer term, "Brexit could therefore ultimately have only a modest impact on prices in general equilibrium".

Carney's intervention is significant as it follows a period of intense political debate about the impact of EU migration on wages and employment in Britain, after a copy of the government's post-Brexit immigration blueprint was leaked to the Guardian earlier this month.

Vince Cable, the leader of the Liberal Democrats, claimed Theresa May suppressed Home Office reports that found little evidence of immigration lowering UK wages.

Although the governor argued there would be no long run impact on jobs and wages from Brexit discouraging EU workers, his speech is likely to be seized upon by Brexiters arguing for tighter immigration controls.

But he also diffuses another argument - that Britain would be able to offset any loss of trade ties with the EU by striking new...