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A thinktank has warned that the UK economy could be 3.6% smaller by 2040 if net migration were reduced to zero, a scenario that would likely force the government to increase taxes to manage a much larger budget deficit.
The National Institute of Economic and Social Research (NIESR) examined this possibility after noting falling birth rates and a sharp drop in net migration last year. If these trends continue, the UK population would level off at around 70 million by 2030, compared with 69.3 million recorded in 2024.
According to Dr Benjamin Caswell, a senior economist at NIESR, zero net migration would significantly slow employment growth and shrink the workforce, leading to a smaller overall economy by 2040.
In the early years, workers could benefit from higher real wages and disposable income, as companies would be pushed to invest more in machinery and boost productivity. Under this scenario, GDP per person could rise by about 2% by 2040. However, these gains would be outweighed over time by weaker economic growth caused by an ageing and non-growing population.
With fewer people of working age, tax revenues would fall while public spending pressures increased, widening the gap between government income and expenditure. Caswell described this as effectively freezing population growth while the population continues to age, a situation that becomes increasingly costly over the long term.
NIESR estimates that the government would likely rely on borrowing to cover this gap, pushing the budget deficit up by around 0.8% of GDP — roughly £37bn — by 2040. This projection assumes that government spending and tax policies follow the Office for Budget Responsibility’s forecasts until 2030, after which public spending remains a constant share of GDP.
While some welfare payments, such as child benefit and jobseeker’s allowance, would adjust in line with population changes, overall government spending and investment would remain broadly unchanged. Caswell cautioned that unless birth rates rise, zero net migration would be financially unsustainable without major tax increases, which could in turn damage economic growth.
The analysis follows a sharp decline in net migration in 2025, which fell from 649,000 to 204,000 in the year to June after tighter work visa rules introduced by the Conservative government. NIESR noted that further measures by the Labour government, particularly in health and social care recruitment, could reduce migration even more.
Meanwhile, births and deaths in the UK have been roughly balanced since the beginning of the decade, meaning that future population changes are being driven almost entirely by migration.
