The coalition's immigration crackdown has put skilled workers off coming to Britain while failing to control migration, a major new report has indicated.
The study, carried out by the Migration Observatory at the University of Oxford, undermines David Cameron's insistence that the government's plan to reduce net migration would not stop Britain being "open for business" and attracting the "brightest and best" overseas talent. Business leaders welcomed the study, saying that it should prompt some 'real soul-searching" among ministers.
Tory ministers have pushed through measures to clamp down on working migrants in a bid to fulfill the prime minister's promise to reduce net migration to the "tens of thousands" by next year. However, that pledge looks on track to be broken as the latest figures from the Office for National Statistics show that net migration - the difference between people coming in and leaving Britain - was now at 212,000, more than twice the intended threshold.
According to the study, the 39% drop in working migrants from outside Europe has been compensated for by a 53% rise in new arrivals of skilled migrants from EU neighbours like France, Germany and Spain, despite stricter visa controls starting in 2011.
The number of highly skilled migrant workers in the UK dropped by 10% overall, from 270,000 to 242,000, between 2011 and 2013, the figures showed.
Simon Walker, director-general at the Institute of Directors, said the findings "should cause real soul-searching in the Home Office because [their] intransigence on this issue is damaging the UK economy".
He added: "They see their role to keep people out rather than to serve the broad economic needs of the UK as a whole".
Meanwhile, business secretary Vince Cable said the Migration Observatory's report was "deeply worrying" and proved that the net migration cap had "a damaging impact on UK plc by reducing the talent pool available to companies based here".
He told the Financial Times: “The harder we make it for international companies to employ the very best executives, the harder it is to sell the UK as a place to do business and foster employment opportunities.”
Cable has previously been mocked for failing to stop Theresa May's net migration cap, with shadow business secretary Chuka Umunna arguing that it has caused "immense damage" to the economy.
In response to the research, immigration minister James Brokenshire said it was “clearly nonsense” to suggest that Home Office policies stopped companies from hiring the skilled workers they needed.
“This report shows that UK companies have access to the labour market across the EU, which has a combined population of 500m people, and can still recruit highly skilled migrants from outside the EU,” he said.