UK economy could be significantly smaller by 2040 if net migration were to fall to zero, according to new analysis by a leading economic research institute. The modelling suggests that a prolonged halt in net inward migration would slow workforce growth and reduce overall economic output, placing additional pressure on the public finances.
Economists estimate that under a zero net migration scenario, national output could be around 3.6% lower by 2040 than it would otherwise have been, reflecting reduced labour supply and slower employment growth.
Population Growth Set to Stall
The analysis assumes that current demographic trends continue, with low birth rates and limited inward migration. Under these conditions, the UK population would plateau at roughly 70 million by the end of the decade, before beginning to age more rapidly.
Official data show that the population stood at approximately 69.3 million in 2024, with recent population changes largely driven by migration rather than natural increase, as births and deaths have been broadly balanced in recent years.
Short-Term Wage Gains, Long-Term Fiscal Strain
In the early years of a zero-migration scenario, households could see some benefits. With fewer workers available, employers may invest more heavily in automation and productivity-enhancing technologies, leading to modest increases in real wages and disposable incomes. GDP per person is projected to rise by around 2% by 2040 under this scenario.
However, economists warn that these gains would be outweighed over time by structural challenges. An ageing population and a shrinking workforce would reduce tax receipts while increasing demand for public services, particularly healthcare and pensions.
Growing Budget Deficit
The research suggests that the gap between public spending and revenue would widen steadily over the next two decades. By 2040, the annual budget deficit could increase by around 0.8% of GDP, equivalent to approximately £37 billion in today’s terms.
The projections assume that government spending and tax policies follow the trajectory set out by the Office for Budget Responsibility until the end of the decade, after which public spending remains broadly stable as a share of GDP.
While some areas of expenditure, such as child-related benefits and unemployment support, would adjust automatically to population changes, other forms of public spending including investment and core public services are unlikely to fall significantly.
Sustainability Concerns
Economists behind the study caution that maintaining zero net migration over the long term would be difficult without policy adjustments. Unless fertility rates rise meaningfully, the public finances could become increasingly strained, potentially forcing future governments to raise taxes or cut spending.
They warn that significant tax increases, while helping to stabilise the budget, could also dampen economic growth if implemented aggressively.
Migration Policy in Focus
The findings come amid a sharp decline in net migration following tighter visa rules introduced in recent years. Net migration fell markedly in the year to June 2025, reflecting restrictions on work visas and changes to eligibility requirements.
Further policy changes, including adjustments to recruitment in health and social care, could reduce migration flows further, reinforcing the demographic and fiscal challenges identified in the analysis.
Long-Term Implications
The research highlights the central role migration plays in sustaining economic growth and public finances in an ageing society. While short-term adjustments may appear manageable, economists stress that over the longer term, demographic stagnation could leave the UK with slower growth, higher borrowing and more difficult fiscal choices.
Follow us to stay updated on changes to UK immigration law, policy developments and guidance affecting migrants, employers and families.
With over 20 years of experience and a commitment to excellence, Morgan Smith Immigration is your trusted partner for all your immigration needs. Contact us today to learn more about how we can assist you with UK visa applications. For enquiries or assistance, call us at 0203 959 3335 or email [email protected].
