Foreign IT staff could be forced to leave the UK

This is the result of a government decision last month to remove IT from its "tier one" list of occupations that are suffering a staff shortage, headhunters say.

Investment banks have hired hundreds of IT staff from India alone in the past two years, according to Ben Dear, managing director of the recruitment firm Cresta.

Many arrived on short contracts of between three and six months, which until now have often been renewed. Now they and other non-EU nationals are at risk.

They had been allowed to enter the UK since 2000, when IT staff were added to the "tier one" list. Hiring was then at a peak because of the millennium bug problem, the changeover to the euro and strong economic growth.

The change relaxed the normal requirement that jobs first be advertised domestically.

Banks taking advantage of the relaxed law sometimes paid foreign IT contractors up to one third less than the going rate for UK contractors, headhunters say.

However, redundancies mean that IT staff are now easier to find. Following lobbying by the Professional Contractors Group, which represents UK IT workers, non-EU IT experts may only be employed in future if it can be proved that there are no suitable domestic applicants for a position.

Dear says providing such proof will be costly and is likely to make the renewal of existing contracts financially unviable. "People won't be thrown out immediately, but visas won't be renewed," he says.

Although Dear welcomes the move, which is likely to benefit struggling UK contractors, others are unsure.

Simon Denison-Smith of Rave Technologies, which specialises in the offshore development of IT projects, says tighter immigration restrictions could backfire.

"IT contractors have traditionally commanded high sums in the UK. The new regulations may encourage banks to move IT development offshore, or to more friendly environments such as New York, where offshore staff can still be used."

Banks have already outsourced a lot of their IT development work to India, says Denison-Smith. Cost-cutting means this trend is set to continue.

Denison-Smith forecasts that IT positions will be reclassified as a shortage occupation in the future. Work Permits (UK), the government department responsible for the decision, plans to reconsider the issue in three months' time.