The most striking thing about the record rise in net migration in the year to June 2022 is that it has not prevented the decline in the labour force. Without the rise in net migration, the labour force would presumably have shrunk by even more. Our forecasts incorporate a rebound in the labour force over the next couple of years. If that doesn’t materialise, then for any given level of demand there will be a bit more inflation than otherwise and the UK’s potential growth rate will have taken another permanent hit.
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