Latest research from Colliers International predicts that as the weaker Pound in Brexit Britain continues to affect the economy, prompting a wave of workers in Western Europe to return to CEE-6 countries having a positive knock on effect on local property markets. The upsides are likely to be higher demand for office and industrial real estate space as indigenous workers to return eastwards; as well as filling the skills gaps that these workers had created by seeking work in the West.
Peter Leyburn, EMEA Director of Client Services at Colliers International commented:
“Over seven million citizens, mainly young, skilled and educated, from the CEE-6 countries, currently reside in Western Europe and this has caused huge labour shortages in Eastern Europe and has created other negative demographic and economic consequences. However, a combination of wage rises; low taxes; better governance and legal frameworks; more modern education systems; a more familiar cultural milieu and encouragement from governments could well be “pull” factors to encourage those who have migrated to return. This market dynamic, termed the “labour force boomerang”, is likely to translate into increased investment interest, provided that worker productivity can keep pace with Europe. This should mean higher demand for office and industrial real estate space and increased retail spending.
“Future wages will grow faster in CEE, which is the argument for workers to stay in their native countries. The far superior rate of wage cost growth historically in the CEE-6, is something that, with low unemployment rates and high GDP growth rates, looks very likely to sustain over the next 10 years”.
What does this mean for the UK?
A significant proportion of CEE emigrants reside in the UK: 40% of the Slovaks in Western Europe, for example. “Brexit“ has of course dealt the “European project“ a blow. But thus far, one year after Brexit, there are no real signs of change in the politics of the free movement of people (excepting the UK), including that thus far anti-EU-immigrant platforms have not garnered significant political influence in western European legislatures.
The below chart shows % of of CEE-6 migrants in the UK and % of source country population in the UK
The exodus- scope of the diaspora
The westward drift of the populations born in the CEE-6 countries turned into more of a flood after EU accession of the Visegrad-4 countries in 2004 and the lifting of all restrictions on free movement of Romanians and Bulgarians in 2014.The large income disparity between sources and destinations was the prime motivator for the flow of people.
The below graph illustrates the equivalent % of population of country residing in “Western Europe” in 2016.
Shifting “push” and “pull” factors for emigrants
Looking at the financials, tighter labour markets in CEE are forcing wage inflation for skilled workers especially. Minimum wages are rising significantly (7%-c.15%) this year in the CEE-6. Currency effects (including a weaker Pound in Brexit Britain) and tax rates are pointing towards a faster closing of the still-yawning net wage differentials over the next 5-10 years. CEE’s cost of living is rising but that factor is increasing faster in places such as the UK.
Emotional factors, such as use of native language or education as young people progress into family status are up to each individual to judge. Arguably, some of the prior CEE “push” factors, such as corruption, political instability and institutional weakness have ebbed somewhat. OECD data suggest a deterioration in the “quality of life” in some Western European countries. Despite these “push and pull” factors pointing in favour of a repatriation of CEE workers, employee surveys in CEE still point to a desire of young people to follow their peers westward.