The latest population report from the ONS created a lot of headlines related to immigration and how it was going to be responsible for the countries’ size increasing 0.7% a year in the coming decade. But how credible are these forecasts and what are the key assumptions behind them?
First a few of the facts that ONS published:
- The UK population is projected to increase by 9.7 million over the next 25 years from an estimated 64.6 million in mid-2014 to 74.3 million in mid-2039.
- Population will continue to rise over the whole of the next century and will reach 95 million by 2114.
- Assumed net migration accounts for 51% of the projected increase over the next 25 years, with natural increase (more births than deaths) accounting for the remaining 49% of growth.
- The population is projected to continue ageing, with the average (median) age rising from 40.0 years in 2014 to 40.9 years in mid-2024 and 42.9 by mid-2039.
- The UK is projected to have the largest population in the EU by 2047 and to have grown the most in absolute size, i.e.
Population projections comparison for countries in the European Union (Eurostat)
* Note: The latest ONS projections show even higher UK population growth i.e. 74.6m by 2039/40 not 73.5m.
There is no doubt that the UK population will continue to rise in the short-term. However the extent of that rise and how long it will continue for are more debatable. It is therefore important to look at some of the key assumptions made by ONS and how valid they might be.
Net Immigration. The ONS is assuming that the current level of migration inflows of 653,000 people in 2014/15 will decline only slightly by 2020/21 to 518,000 and then persist for the rest of the next 100 years. It strikes me as highly unlikely given our acute housing shortage and the rise of the ‘politics of identity’ that such levels of immigration will be allowed to continue and certainly not in the long-run i.e. for more than another decade. The EU comparison table above projects that the UK will be the net recipient of the largest number of EU migrants, which seems politically unlikely. Indeed it is not impossible that the UK might even vote in 2017 to come out of the EU and that would bring these projected inflows to an abrupt halt.
These assumptions are absolutely key to ONS’s projections. If you were to assume net migration grown to halt tomorrow, ONS predict that the population would only rise 3.1m by 2039 and not 9.7m. Moreover even those growth estimates may be too optimistic.
Fertility rates. The other key assumption made by ONS is that UK fertility rates (i.e. the number of children each woman has) will rise from the current level of 1.81 to 1.89 by 2032/33 and then remain at that level. Across the world from South America to SE Asia, fertility rates have been collapsing over the last few decades. They are 1.5 in Russia, 1.4 in Germany, 1.3 in Korea and 1.8 in Brazil for example. They are even declining in India – now just 2.5. ONS are assuming that immigrants to the UK will have significantly higher fertility and that is what is going to increase our rate. Although there is some evidence for this, it is also possible that newer migrants may not be as fertile as some might have expected. Most come here to work and so fertility will decline, just as it is doing in their home countries.
What does this mean?
Like I pointed out recently, ONS data quality can be an issue. In this case, their projections are probably significantly exaggerating the growth of the UK population. That being the case, the UK working population is going to eventually decline during the 21st Century. Overall spend of UK consumers will also decline as the proportion of older people grows more than is projected in this analysis. That decreased demand will create pressure to keep inflation low. See full argument here.