SEPTEMBER 28, 2010.

U.K.'s Immigration Rules Slammed

By CASSELL BRYAN-LOW And ALISTAIR MACDONALD

LONDON—Large corporations and other employers are turning up the heat on the U.K. government as it finalizes new immigration rules that industry says would restrict their ability to recruit key talent.

Border authorities in June introduced a temporary cap on how many skilled and highly skilled workers employers can hire from outside the European Union. This month, the government ended a consultation period on the policy change and is expected in coming months to announce the permanent rules that will take effect in April.

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Prime Minister David Cameron at a Coca Cola factory.
.The current restrictions already are having a negative impact, employers and their lawyers say. Firms that have expressed concern to the government include drug maker GlaxoSmithKline PLC, computer firm International Business Machines Corp., conglomerate General Electric Co., as well as banks J.P. Morgan Chase & Co. and Deutsche Bank AG, people familiar with the matter said. At some companies, the temporary cap has virtually eliminated the ability to hire skilled workers from outside the EU.

The restrictions make it more difficult to plan, and in some instances positions are going unfilled or companies are moving operations overseas, industry representatives say. While the number of jobs currently affected may not be huge, employers worry about lacking flexibility to hire as the economy improves. Another concern: The uncertainty will discourage multinational companies looking to build up their presence in the U.K.

For employers, the key to determining which countries to invest in "is not simply cost and logistics but access to skills and talented people," said David Brown, head of the Institute of Chemical Engineers in the U.K. Without that, he said, employers will "go elsewhere."

Britain remains "open for business," said Immigration Minister Damian Green. The government "believes that Britain can benefit from migration but not uncontrolled migration" and aims to reduce net migration to the tens of thousands, he added. In 2009, 196,000 more people came to the U.K. than left, a 20% increase from 2008.

A key complaint from employers is how the temporary cap has been implemented. Companies received an allocation of so-called tier-two visas for skilled employees for the nine-month duration of the cap based on their number of hires in the previous year. But that was a time when many companies were being very conservative in their hiring due to the economic downturn. In some instances, companies have received an allocation of zero, lawyers say.

GE, which hires on average three people every day in the U.K., is restricted to a cap in the single digits, a person familiar with the quota said.

The company says the quota is proving a particular challenge for hiring in high-end technology and engineering. Hires that have been nixed as a result include a stem-cell research executive from India as well as gas turbine engineers.

"If industry cannot fill some of these specialist roles with outside help, it will hinder the U.K.'s revival efforts," GE's U.K Chief Executive Mark Elborne.

Julia Onslow-Cole, head of immigration at PricewaterhouseCoopers LLP, said the advisory firm had received an allocation of 50 tier-two visas but had already identified more than 60 existing employees who would need to renew their visas during the interim-cap period. That has forced the firm to explore alternative visa routes, she said.

Ms. Onslow-Cole, who also advises PwC's clients on the issue, said it is proving problematic for large banks, some of which have received quotas of about 30 or so visas. Many banks already are looking into whether to move operations overseas as a result of tougher regulation in the U.K. and "many feel this is the last straw," she added.

.The government is unlikely to back down in a significant way. The cap was a key part of the Conservative Party's recent campaign with many voters concerned about unemployment and a strain on public services. The Conservatives formed a coalition government in May with the Liberal Democrats.

Still, the cap has drawn opposition from leading politicians, including Vince Cable, the U.K. business secretary and a Liberal Democrat, who has called the policy damaging to British industry.

GlaxoSmithKline, one of Britain's biggest companies, is limited to hiring only one skilled person from outside Europe under the interim cap, according to a person familiar with the matter.

The drugmaker's main concern, though, is whether in-company transfers from overseas to the U.K. will be affected by the permanent rules, something the government is considering even though they are excluded from the temporary cap. GlaxoSmithKline typically transfers about 50 chemists, biologists and others annually from overseas operations.

"It is very important that this doesn't inadvertently prevent global businesses based in the U.K., such as GSK, from moving employees with specialist skills" between countries, a company spokeswoman said. She declined to comment on the company's quota.

BAE Systems PLC, one of the world's largest defense contractors. "We do not believe the simple application of the cap makes sense for global business like BAE Systems," a spokeswoman said.

IBM didn't respond to requests to comment.

Big corporations aren't the only ones affected. Chris Hogan, assistant director of children's services at Hounslow Council in London, expects to have difficulty recruiting staff, particularly in child protection, where there is a national shortage of experienced staff. Many authorities rely on hiring from India, North America and South Africa.

The authority is ramping up training and recruitment within the U.K. but it takes time, Ms. Hogan said. She can turn to Europe but it is often more challenging to find the right candidates because of language—in a field where nuances are important—and different training and legal frameworks.

"If we lose the ability to keep or obtain those people, it will have a significant impact on our ability to keep children safe," said Ms. Hogan.

Write to Cassell Bryan-Low at cassell.bryan-low@wsj.com and Alistair MacDonald at alistair.macdonald@wsj.com

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