The UK net migration impact on long-term growth could be severe, with the economy forecast to be 3.6% smaller by 2040 if net migration falls to zero, according to new analysis by the National Institute of Economic and Social Research (NIESR).
The warning comes as the UK faces falling birth rates and a sharp slowdown in inward migration, prompting economists to assess the consequences if current trends persist through the end of the decade.
Population growth would stall by 2030
Under the zero-migration scenario modelled by NIESR, the UK population would stop growing around 2030 at roughly 70 million. Official figures show the population stood at 69.3 million in 2024, with recent growth driven almost entirely by migration rather than natural increase.
Dr Benjamin Caswell, senior economist at NIESR, said the slowdown would result in a much smaller workforce over time, curbing employment growth and overall economic output.
Short-term wage gains but long-term damage
The analysis suggests that in the short to medium term, workers could benefit from modest gains. Firms facing labour shortages would invest more in automation and productivity, pushing up real wages and disposable incomes. GDP per capita is forecast to rise by around 2% by 2040 under the zero-migration scenario.
However, NIESR warned these gains would be outweighed by the long-term effects of a shrinking and ageing population. Fewer workers would mean lower tax revenues, while age-related public spending pressures would continue to rise.
Budget deficit and borrowing set to rise
As the gap between government spending and tax receipts widens, the thinktank estimates the budget deficit would increase by around 0.8% of GDP by 2040, equivalent to roughly £37bn at today’s prices.
These projections assume that fiscal policy follows the current path set out by the Office for Budget Responsibility through to 2030, with government spending thereafter remaining broadly stable as a share of GDP.
Caswell said that while some welfare payments, such as child benefit and jobseeker’s allowance, would fall in line with population changes, overall government consumption and investment would not decline enough to offset lost revenues.
Higher taxes likely without migration or baby boom
NIESR concluded that zero net migration would not be fiscally sustainable unless there was either a sharp rise in fertility or significant tax increases.
Caswell warned that large tax rises could themselves suppress growth, creating a negative feedback loop for the economy over the long term.
Migration slowdown already under way
The forecast follows a dramatic fall in net migration during 2025, from 649,000 to 204,000 in the year to June, after the previous Conservative government tightened work visa rules.
NIESR noted that further reductions could follow under Labour, particularly through changes to overseas recruitment in health and social care. With births and deaths now broadly balanced, migration remains the decisive factor shaping future population growth in the UK.
Economists say the findings highlight the growing tension between political pressure to curb migration and the economic reality of sustaining growth, public services and the tax base in an ageing society.