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Sunday, March 1, 2020

Immigration: No visas for low-skilled workers, government says. Technology to the rescue again. CoronaCrisis?

Immigration: No visas for low-skilled workers, government says. Technology to the rescue again.

It is going to be very interesting to see how this country adapts if the government really does impose severe restrictions on immigration.

The planned restrictions mean that anyone who doesn't earn over £26,000, speak English and have a job offer will not be allowed to work in the UK unless they fall into certain special categories.

This will cause a crisis in sectors that have seen huge growth in recent times and been heavily dependent on foreign (EU) workers to support that growth. Examples that come immediately to mind are Hospitality (hotels and restaurants), Construction and Farming to name just three.

According to the BBC, 'Home Secretary Priti Patel told BBC Breakfast the government wanted to "encourage people with the right talent" and "reduce the levels of people coming to the UK with low skills".' They said that there are 8.5 million inactive British people who will fill the gaps.

Home Secretary, Priti Patel's department claim there are 8.5 million Brits ready to work

This is pretty incredulous as all we hear from employers is that they don't get many British people applying for the jobs. Where are all these 8.5m people waiting to fill all the vacancies? They will probably fudge the farming issue by allowing migrants to enter the country as temporary workers for limited periods (e.g. at harvest time). But can you imagine what will happen to the likes of Pret and all those café and restaurant chains staffed almost exclusively by EU citizens? And what about the construction industry? How is a massive shortage of labour going to help the government get all those houses we so desperately need built?

The future as I see it in these circumstances is automation. Business will not have any other option. Imagine what cafés will be forced to do. Instead of having employees serving coffees and drinks and taking your payments at the counter, the entire operation will be automated. You will take your food from the shelves, self-serve your drinks from machines designed for this purpose and then scan and pay at the automated till. Cameras will alert security to theft and a security guard will be the only permanent employee. Robotic shelves and machines will send alerts when they need replenishing and a van will turn up as required to re-stock and give the place a clean. This way, the team currently operating in one café will be able to look after several that are located fairly close by. All this technology already exists.

With further staff shortages inevitable, automation is a good solution

I am quite sure businesses will find other ways of operating with a much lower headcount. Some costs will rise, but overall they will become more profitable due to reduced payroll costs. Payroll is one of the largest overheads so businesses may be forced to make changes that actually benefit their profitability.

On the plus side, those people with jobs in these industries will be highly sort after and their wages are likely to see significant upward pressure, diving up inflation.


What started in China in January has now spread to the rest of the world. It seems that not only can a filthy animal market in Wuhan in China lead to thousands of people dying, but it has the power to put a large dent in our economies.

This graph is a mirror of the FTSE 100 graph shown below

Last week, the UK FTSE 100 closed down 12% on the week, following widespread downgrading of economic growth. Stock markets around the world have been behaving in a similar fashion. What nobody knows for sure is whether this is an overdue correction, triggered by the coronavirus outbreak, or whether this is a new (long over-due) recession just starting. My fear is that markets will continue to fall next week as the full impact on the economy becomes better understood and as the virus continues to make in-roads globally.

FTSE 100 Jan and Feb 2020
The only potential good news in all of this is that the death rate in China appears to have been stabilised by the harsh but effective measures implemented by the Chinese government. That assumes that the data provided is accurate, unlike the Iranian authorities who have been lying in an effort to underplay the extent of the outbreak in their country.

Quote for the month:

"You see who is swimming naked when the tide goes out." Warren Buffett

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