A new analysis from the National Institute of Economic and Social Research (NIESR) has warned that the UK economy could be around 3.6% smaller by 2040 if the country reaches “zero net migration” – a scenario where the number of people leaving Britain matches those arriving.
While migration debates often focus on domestic policy, the findings are particularly relevant for the hundreds of thousands of British expats, including the large community living in Spain. Economic growth influences everything from pension stability and taxation to currency strength – all key concerns for Britons overseas who may be planning their long-term financial future or considering a return to the UK.
Why this matters to British expats
For many British expats, the health of the UK economy remains important even after relocating abroad. A slower-growing economy can shape government spending, impact the value of retirement income, and influence how far savings stretch, especially for those drawing UK pensions or holding property in Britain.
A smaller economy does not mean immediate decline, but it can signal tighter public finances ahead. Experts typically warn that when governments collect less tax, they are often forced to make difficult decisions such as raising taxes, increasing borrowing, or reducing spending.
For expats weighing whether to return home in the future, these long-term economic signals can offer valuable context.
What “Zero Net Migration” actually means
Net migration refers to the difference between people moving to the UK and those leaving. If the figure reaches zero, population growth from immigration effectively stops.
According to NIESR, without inward migration the UK population could level off at roughly 70 million by the early 2030s, largely due to declining birth rates and an ageing population.
This matters because economic growth is closely tied to the size of the workforce.
Put simply, fewer working-age people typically means:
Over time, this results in a smaller overall economy compared with a scenario where migration continues to contribute to labour supply.
However, the picture is not entirely negative.
Interestingly, the research suggests that wages and productivity per worker could rise slightly if migration falls. Labour shortages often push employers to invest more in technology and automation, potentially boosting output per employee.
NIESR estimates that GDP per person could increase by about 2% by 2040 under a zero net migration scenario.
But economists caution that even if individuals earn more on average, the country as a whole may generate less wealth — creating broader fiscal challenges.
One of the thinktank’s biggest concerns is the strain on government finances.
With fewer workers paying income tax and more retirees relying on healthcare and pensions, the UK could face a widening budget gap. By 2040, the fiscal shortfall could be roughly £37 billion larger than current projections if migration remains positive.
The bigger picture for Britons living abroad
For British expats in Spain and elsewhere, the takeaway is not that the UK economy is heading for crisis. Rather, it suggests that migration policy plays a significant role in shaping long-term growth.
A larger workforce generally supports stronger economic expansion, while a shrinking labour pool can limit it.
Anyone planning retirement, managing UK-based assets, or contemplating a future move back to Britain may benefit from keeping an eye on these demographic shifts.