Has the Government’s restriction of Tier 1 visas started to affect the London IT market?

When the Government stopped issuing Tier 1 visas (previously known as the Highly Skilled Migrant Visa) I knew that it was going to affect the IT recruitment market because at least half of the Java developers I had placed that year had either been on a Tier 1 visa, or had residency following 5 years of living and working in this country.

In my opinion this was the first disappointing thing the Conservative-lead coalition Government did. An amateurish and ham-fisted effort to cut down on headline immigration figures, whilst in fact doing nothing to help the domestic labour market and instead hitting the UK economy where it really hurts – in the financial service sector. Not only does the economy need these people, but each Tier 1 visa the Government granted made them thousands of pounds in fees and the migrant would pay tax at the highest rate.

The criteria to qualify for a Tier 1 visa was quite tough: you had to earn something like 40k sterling in your own country, have a significant amount of cash in your bank account and have a specialist skill that the UK had indicted that it was lacking its domestic labour market. And the point is that we really do lack these skills, we just don’t have enough home grown computer scientists, software engineers and IT developers who can hit the high benchmark the financial services industry requires. This is almost definitely a result of the lackadaisical approach to standards we have had in this country for the past 20 years (or more).

But until last Christmas it didn’t really feel like this restriction on immigration had had much affect. I think much of the affect that this should have had, has been masked by a continuing trend to outsource or nearsource by the big investment banks (the banks have long had a presence in global outsourcing centres like India, Singapore and Russia; but more recent the likes of Morgan Stanley and Credit Suisse have also opened centres in Hungary and Wroclaw respectively).

Another mitigating factor has been that many contractors hired in the good years have been let go. Now in the main that doesn’t mean that they have taken up the jobs that permanent developers with Tier 1 visas would normally have taken (these contractors have tended to hold out for another contract rather than take a permanent position), but what it has done is created more opportunities for staff in big companies to move internally; meaning that the big IT employers have had to go to market less than in previous years.

One area where that internal movement has not been able to satisfy staffing requirements, is for graduate and junior positions, and surprise, surprise demand for developers with this small level of experience has increased. So its become much harder for recruiters to find promising junior developers, and starting salaries have been pushed up.

One knock on affect of this tightening of the labour market has of course kept contractor rates artificially high. Normally contractors provide labour market flexibility, and as such their rates go up and down with demand. That is happening to a certain extent, but many contractor rates are remaining at, or around, 2010 levels.

So what’s going to happen next?

The country used to grant Tier 1 visas to make up for shortfalls in very specific, highly skilled workers, that the UK could not provide domestically. The logical result of this is going to be more off and near-shoring, incidences of companies providing visas will become commonplace (as is already starting to happen), migration across the EU will continue to increase (we are already seeing lots of Greek programmers coming to London for instance) and sadly smaller IT dependent companies are going to start looking to establish themselves elsewhere.

Talent and entrepreneurialism are the only things that we can rely on to get ourselves out of this recession and remain a leading force in the market, we need to invest more in education now!


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