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Top Traders Risk Expulsion in Brain Drain From U.K. Visas

Top Traders Risk Expulsion in Brain Drain From U.K. Visas
Pedestrians walk over London Bridge. Photographer: Chris Ratcliffe/Bloomberg

U.K. lawyers are fielding a flood of questions from multinational firms as a government shake-up of visa rules threatens to cut short the careers of top traders and other executives transferred from overseas.

Changes in the past two years include a five-year cap on how long employees who moved to the U.K. under the Intra Company Transfer system can stay, and the removal of their right to settle permanently. The introduction of a cooling-off period between visa applications means employees have to spend at least 12 months out of the country once their permit expires.

“We’ve seen quite significant panic among a number of clients,” said Ben Sheldrick, a partner with Magrath LLP Solicitors in London. “The government wants to be seen to be tough on immigration and one of the only groups they can be seen to be reducing is the skilled migrants sponsored by multinational firms.”

The government is restricting foreign workers as Britain’s economy slumped into its first double-dip recession since the 1970s in the first quarter. Bank of England policy makers voted to keep the benchmark interest rate at a record-low 0.5 percent on June 7. The Centre for Economics & Business Research Ltd. said last month that Europe’s sovereign debt crisis may reduce employment in London’s financial services industry to the lowest level since 1996.

Counting Points

The Home Office introduced a points-based system in 2008, culling the routes available for migrants to five tiers down from 80 visa categories. This included scrapping the Highly Skilled Migrant Programme Visa, a favored option for employees of banks and law firms.

“We need to wean U.K. employers off their addiction to migration and clamp down on backdoor routes used to avoid our tighter controls,” the Home Office said in an e-mailed response to questions. “We believe the changes we have introduced represent a very good deal for businesses.”

A November report commissioned by the City of London Corporation found a lack of clarity about immigration prompting managers to postpone expansion and growth plans. It also said some companies had lost teams to other countries, and had reduced their U.K. headcount, an “early sign of a silent and potentially devastating trend for the recovering U.K. economy.”

“We are giving the impression that we aren’t open for business,” said Mark Boleat, City of London Corporation’s policy chairman, which oversees Britain’s main financial district. “We have worked with the Home Office as best we can on its policies with our objective of minimizing the damage.”

Other Countries

Migrants to the U.S. can get L-1 intra-company transferee visas, granted for an initial one- to three-year period and extendable to seven years for executives and managers. They may also be eligible for permanent residence status. In Hong Kong, the equivalent employment visa is valid for an initial 12 months and may be extended with no limit on renewals. After seven years, holders may apply for permanent residence.

“The truth of the matter is the U.K. system can work better than other immigration systems across the world,” said Caron Pope, managing partner at Fragomen LLP in London, a global immigration law firm. “Unfortunately, an insistence on layering change over change has reduced business confidence and created a complex and confusing policy framework.”

The Home Office maintains the Intra Company Transfer route is a temporary solution for companies needing a particular skill set from overseas, while permanent jobs should be filled locally. If a U.K. applicant can’t be found, an overseas employee can use the Tier 2 general visa route, which allows for settlement after five years.

“Businesses really rely very heavily on people who have proprietary knowledge of their organization,” said Sheldrick at Magrath, which provides immigration services to Bloomberg LLP, the parent company of Bloomberg News. The U.K. “used to compare very favorably in terms of its efficiency and its route to settlement but now it is certainly falling behind because of these changes,” he said.

Policy Changes

To qualify for settlement, applicants must spend no more than 180 days outside the country in five years. Some absences can be ignored at the discretion of the Home Office. Additional changes announced in April mean migrants that don’t qualify to settle within six years have to leave for at least a year.

“It’s very difficult for companies to formulate a long-term strategy for immigration given frequent changes in policy,” said Margaret Burton, a director at Deloitte LLP in London. “What concerns me is seeing people wrong-footed by the law. We are being contacted by companies surprised that their people are caught by exclusion periods and other recent changes in policy.”

The Conservative Party pledged in its manifesto for the 2010 election to reduce net migration to the “tens of thousands” by 2015. Immigration Minister Damian Green said last year that the U.K. needs an immigration policy that reduces the numbers to “levels where people feel comfortable.”

Slowing Economy

Sarah Mulley, an associate director for immigration at the Institute for Public Policy Research, said “painful” policy changes have done little to reduce net migration. She wrote in an article on the institute’s website last month that the slowing economy is the main driver of reduced work-related immigration. The 10-year gilt yield reached a record low of 1.439 percent on June 1 as the economy contracts.

Net migration, which includes British, European Union and non-EU nationals coming in or out of the U.K. for at least 12 months, was 252,000 in the year to September 2011, little changed from a year earlier, according to last month’s data from the Office for National Statistics. The number of work-related visas cleared in the year to March 2012 declined by 8 percent, to 148,498.

“The aggregate view among our clients is that the changes are making the U.K. an increasingly difficult place to do business,” said John Purcell, founder of London-based executive search firm Purcell & Co. “London in particular is an international city requiring international talent. Having a bias toward U.K. nationals is a hugely retrograde step.”

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