Ever since the end of foreign exchange controls in the UK, back in the 1979s, there has been no official mechanism for recording international monetary transactions, including the volume, destination, and use of remittances from the UK. The Office for National Statistics (ONS) does not publish estimates of remittances to and from the UK. Therefore, the discussions about remittances are an estimation from the World Bank, Eurostat and remittance-recipient countries.
Even within the same organization as the World Bank, there are different estimates of remittances flows to and from the UK. Remittances flows are also difficult to capture in totality, as there are unofficial transfers (e.g., money sent with friends and family members visiting the UK) that may account for a significant portion of remittances, making it difficult to record these flows.
What are the implications for expats?
Nigerian, Pakistan, and Indian expats in the UK are sending money back to their countries, so their children can stay in school. Also, hundreds of millions are sent to Poland, China, Kenya, the Philippines, Bangladesh, and Ghana each year. But Unesco warns too much of this ”hard-earned money” is being taken in transfer charges by finance companies. It says that people wiring money should only have to pay 3% in charges—but the global average is 7%. “Companies should not be allowed to continue skimming off so much of the money that migrants are sending back home,” says Manos Antoninis, director of the Global Education Monitoring report. “Such transaction costs are highest for the poorest migrants, he adds.”
The Association of UK Payment Institutions says prices would be lower if regulators allowed more companies to compete in this market. The remittances sent home by migrants can be a lifeline for families in poorer countries—sent back by people working in wealthier parts of the world. But as the coronavirus pandemic limits the ability of migrants to work and send their wages back home, that lifeline is drying up.
Migrants in the UK send money home using several channels. These include family and friends returning home, money transfers operators (MTOs) such as Western Union and MoneyGram, banks, and informal hawala brokers (House of Commons 2004). The hawala method of transferring money is informal, and it is very difficult to trace most of these flows using official government records. Chandra Ceeka had a lot of problems getting money to his family. He's an IT consultant from India who has been living in Britain for 18 years and regularly sends money back to his country. Although there were digital remittance services available during the Covid-19 crisis, he said to BBC that without the relationship he and others in his community have with their local High Street transfer shops, he doesn't get the deals he was used to. “They try to give us some sort of discount on the exchange rate. They try to give us good customer service. As of now, due to the Covid-19 issue, I'm forced to use only online methods, and we don't have an option for any negotiations or anything.”
British economy and remittances
As the UK is estimated to be the world's fourth-largest sender of remittances and well within the top 10 senders to developing countries, the implications of Brexit for UK remittances are a significant development concern. That's because a weak pound or recession could mean a drop in remittances and also because of potential transfer issues. This is another threat to remittances; it is the risk that the system of ‘passporting' for financial services between the UK and the rest of the EU might break down. Passporting is a means by which banks, remittance companies, and other financial firms based in one country in the European Economic Area (EEA) are automatically cleared to offer their services to clients in another country.
According to the Migration Observatory of the University of Oxford, The UK sends twice as much money abroad as it receives, but remittances comprise a smaller share of the GDP than in most other countries. Although there are multiple ways to measure how important remittances from the UK are for recipient countries, Kenya, Nigeria, Zimbabwe, and Lithuania appear among the top 20 countries regardless of the measurement method chosen. Both the World Bank Annual Remittances Data and Eurostat base their estimates on the UK's balance of payments, according to which remittance outflows from the UK stood roughly at GBP 7.7 billion in 2018. UK remittance costs still exceed the goal, but they have been trending downward over the last decade.
It is likely that this estimate is lower than the actual amount of flows because it does not include unofficial transfers. It also fails to account for any social benefits, including social security and pensions, that nonresidents acquire while living in the UK or donations from UK residents to non-profits abroad in the context of international development. World Bank Bilateral Remittances Matrix suggests that outflows from the UK are close to GBP 23.6 billion.
