Why businesses want to recruit from overseas

BBC business editor Robert Peston on the immigration cap

As luck would have it, I bumped into the boss of one of our largest manufacturing exporters last night, who complained that his ability to expand in the UK was being seriously hampered by the new restrictions on his ability to hire from outside the European Union, that have been imposed by the coalition government.

And he also queried whether Vince Cable was the ideal choice for business secretary, since he was unpersuaded that Mr Cable would bat aggressively enough on behalf of businesses like his.

Vince Cable would say it's not his job to bat for this or that company in a partisan sense, or for the entire private sector: his role (probably) is to use whatever micro-economic tools he has to promote economic growth and wealth creation.

Even so he's plainly been hearing quite a lot of complaints akin to those made by that industrial grandee, given his statement to today's FT that "a lot of damage is being done to British industry " by the immigration cap.

There are two issues here: one is whether a coalition government can hold together when one of the most influential members of the minority partners in the administration is so scathing of a central government policy.

But the other is whether Mr Cable is right, that the reduced limits on the flow of skilled individuals from outside the UK is harming the economy and therefore hurting the majority of us.

For most people, there seems to be a contradiction here. Surely if jobs aren't going to managers, engineers, micro-biologists or bankers from India, the US and Hong Kong, they must be going to Brits - which would surely be a good thing.

And this is presumably what David Cameron and George Osborne believe, or they wouldn't have imposed the cap.

However, my manufacturer says that the pool of highly skilled people just isn't wide enough or deep enough in the UK. And in recent weeks I have heard identical comments from bankers, software designers, drug makers and so on.

So if they want to invest and grow in the UK, they argue that they must have the ability to import the best talent from the rest of the world.

Of course, in theory, if the best talent, at the cheapest price, isn't being bought from India, perhaps we'll grow more of the skills we need here in the UK.

The problem is that the required nurturing of so-called human capital takes years.

And British-based businesses want to expand now.

Here's the serious concern: if there are skill constraints on their ability to grow in the UK, they'll take their investment to other countries where the appropriate skills can be obtained.

That would be a concern at a time when public spending cuts are having a seriously dampening impact on an already weak economy - and when the government is relying on private-sector growth to take up the slack.

So, for example, the Office for Budget Responsibility says that if the economy is to grow next year by 2.3%, just over a third of that growth will have to come from increases in business investment and a little bit more will be dependent on improvements in the balance of trade.

Or to put it another way, if businesses choose instead not to invest, and the UK's exporting capacity doesn't increase, growth of 2.3% would shrink to something derisory.

What many businesses have said to me is that it is all very well for the government to turn to them to re-stimulate the economy, and they would like to rise to the challenge, but restricting their ability to buy from across the world is a binding, painful fetter.

You can keep up with the latest from business editor Robert Peston by visiting his blog on the BBC News website.

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