The UK cannot enjoy free trade with the EU without the free movement of labour, EU leaders insisted on June 29 at their first informal summit without the British prime minister. That's a tussle that looks likely to run on for years, which risks antagonising the racial tensions emerging in Britain.

A clampdown to “take back control” of the UK's borders was one of the main pledges of the Brexit campaign. While the leaders of the 'leave' campaign deny the rising wave of xenophobic attacks in the country are connected to the vote to leave the bloc, the surge is damaging the UK’s international image, and reducing its attraction as a destination for workers from across the EU, primarily Central and Eastern Europe (CEE).

Political leaders across the region have called for a sharp response from UK authorities to stamp out the racism, but emigres are feeling frightened and insecure. However, they're unlikely to choose to head home in the sort of numbers needed by a region struggling with a demographic crisis and an increasing shortage of labour.

Despicable

There have been dozens of claims of verbal attacks and threats since Britain voted to leave the EU on June 23, following a divisive campaign focused on immigration. Figures published by the National Police Chiefs’ Council on June 27 showed that there were 84 reported hate crimes in the four days following the vote, which represents a 57% increase compared to the previous month.

Incidents included posting laminated cards through letter boxes of Polish families labelling them "vermin" and the disfigurement of a Polish community centre in west London with racist graffiti. The attacks against the approximately 800,000-strong Polish community, which tops the the list of foreign citizens in the UK, appear to be part of broader rise in xenophobic abuse against non-British residents.  

Social media is flooded with descriptions of xenophobic attacks. On Twitter, it has an own hashtag: #PostRefRacism.

“The first thing a colleague said to me when I went into work after [the Brexit vote] was 'I’ve already asked if we even still have to serve the Eastern European customers',” a British shop assistant reported on a website entitled “This is what you have done, Brexit”.

The official response has been as expected. Prime Minister David Cameron has condemned the surge in racist incidents as “despicable;” Sadiq Khan, London’s new mayor, insisted the police force is on high alert for racially motivated attacks.

The Polish Embassy in London said it is "shocked and deeply concerned" by incidents directed at the Polish community and other Eastern Europeans living in England. Czech Prime Minister Bohuslav Sobotka expressed alarm.

“We should remind ourselves that foreign workers are part of the UK economy, working for Britain’s prosperity,” Sobotka told the Financial Times. “If we see more blatant examples of racism and xenophobia, that will ultimately hurt the UK,” he added.

However, the attacks can also be seen as the result of the uncertainty plaguing the UK's relations with the rest of the EU since the vote. After the EU summit on June 29, innumerable questions regarding how Britain will leave the the block remained unanswered, including the status of foreign workers.

Although European leaders say they aim to ensure that immigrants that moved to the UK before the Brexit vote can stay in the country, the unknowns are piling up, and in light of rising anti-immigrant sentiment, some emigres from CEE suggest they're considering leaving the UK.

“Let’s start to figure out how to pull this lousy Hungary together and make it a liveable place” a member of a Facebook group of Hungarians living in London suggested. It is questionable, however, how many would automatically head back home should they ditch Britain.

Diversion

Analysts suggest CEE countries would likely benefit should workers return from the UK. The region is currently facing severe demographic problems and increasing labour shortages.

Gunter Deuber, head of CEE research at Raiffeisen Bank International (RBI) suggests “there could be some moderate outflow of CEE nationals living in the UK”. However, he does not expect substantial relocations “that could function as a game changer” in the region.

"A complete backward migration would be very unlikely,”  he tells bne IntelliNews. The analyst points out that while in the case of the Baltic states, the numbers living in the UK are equivalent to around 5% of the work force at home, the ratios for other CEE countries are lower. The 800,000 or so Poles in Britain would equal 2-4% of the workforce at home. The number drops to 1-1.5% in the case of Slovakia, Bulgaria, Romania and Hungary, and well below 1% for the Czech Republic.

“We may take some 10-20% of total current CEE nationals/workers living in the UK as potentials for backward migration to their country of origin. Given the small employment effects resulting from such an outflow, we do not expect meaningful relief for the demographic problems and labour shortages in the CE/SEE region,” Deuber sums up.

“From major CE/SEE countries we have currently some 1 million nationals living in the UK, a stock that was mostly build-up over the last 10-15 years, representing an annual migration of 0.15-0.2% of the working population. If we would assume a complete stop, this could have some very smallish positive effect on population dynamics,” Deuber said.

However, RBI forecasts that migration is likely instead simply to divert to other Western European destinations. The lower outflows due to Brexit will not be able to counterbalance the by now usual annual drop of 0.3% in the population of the CEE region.

Counterbalance

Indeed, the numbers suggest that even before the Brexit debate was thrown up, the UK was not as much of a magnet for emigration from CEE as the British press would suggest. Other EU states host many more CEE emigres.

The potential loss of remittances has been identified as a major threat for the region from the UK's exit from the EU, but data suggests the risk may be overstated. Poland and Hungary stick out as the most reliant on wages being sent home from those working abroad. But despite the claims of Brexit campaigners that the UK is being over-run by migrants from the east of the EU, the bulk comes from elsewhere.

Money sent from the UK makes up just 16% of remittances sent to Poland and 9% for Hungary, according to the World Bank. EU statistics office Eurostat reports that remittance flows from the UK to Central & Eastern Europe stood at a maximum of 0.3% of GDP in 2014.

There are understood to be just over 1mn migrant workers from CEE in the UK, and it's unclear whether their legal rights to work in Britain will be hit. "Would the UK halt the free movement of labour? There are plenty of UK nationals living and working in the EU," Juraj Kotian, head of CEE macro and fixed income research at Erste Group, points out to bne IntelliNews.

While the Brexit vote will "probably result in stricter UK immigration controls on EU citizens, those currently exercising their right to work in the UK seem likely to be permitted to continue doing so," Capital Economics asserts.

However, Polish broadsheet Rzeczpospolita suggests 400,000 Poles could leave the UK should immigration rules be tightened. That "could be a counterbalance to the demographic crisis in Poland,” it adds.

Indeed, the vibrant economic growth in CEE, allied with poor demographic trends, have the local labour markets tightening rapidly. Analysts, companies and business lobbies across the region are warning that is becoming a risk to growth and investment.

However, while the return of workers from the UK could in fact prove a bonus, uncertainty reigns supreme. "The most challenging aspect would be if free movement of labour is cut," Kotian continues. "What if the bulk of Poles and Hungarians now in the UK returned to their home countries? The effect on the local labour markets could be significant."

Anywhere but home

For the time being, emigres from the region living in the UK suggest to bne IntelliNews that they will now "wait and see” what happens. They report they are still in a “state of shock” over the result of the referendum and the fact that they now “have to be afraid on the streets just because you are a foreigner.”

However, not many sound keen to head home. They claim that would only be an option if CEE could offer them better living and working conditions than they remember, including competitive wages. Most suggest they would instead eye other Western European countries.

“Past crisis experience has shown that people that emigrated from CE/SEE countries to Western Europe are more mobile within the Western parts of the EU,” suggests Deuber. Increasing labour shortages for qualified workers in some countries may only increase the attraction of a third country destination for anyone leaving the UK.

“We are thinking about moving to Scotland with my brother, as a temporary solution,” a Hungarian man in his thirties, currently living in England, tells bne IntelliNews. “Or maybe Berlin. Or anywhere else; except home,” he adds.