Are Home Office immigration policies sacrificing IT contractors for ‘cheap labour’?

Far from driving down wages, the Skilled Worker route operates as a premium recruitment channel, not a discount store

For years, I've been a firm advocate of controlled immigration to the UK — particularly in technology, where genuine skill shortages have existed. My view hasn't changed, writes Matt Collingwood, managing director of VIQU IT.

The current narrative about Skilled Worker visa-holders…

However, recently, I've noticed a familiar narrative resurfacing; it's one that asserts that Skilled Worker visa holders are undercutting UK IT contractors by flooding the market with 'cheap labour.'

It's an understandable concern.

Many UK IT contractors have seen projects dry up or rates stagnate, and it's easy to connect those dots.

Hard data that busts the 'cheap (tech) worker lie'

But is it actually true that employers are importing 'cheap' overseas labour to save costs? I decided to dig into the numbers. And the story that the data I've obtained tells is very different from the one doing the rounds online.

My eight years of importing software developers to address genuine UK skills shortages

My IT recruitment agency has supported UK employers to relocate IT talent through the Skilled Worker visa route for over eight years. We've helped more than 130 IT professionals and their families to come to the UK — primarily software developers from:

• South Africa,
• Vietnam, and
• the Philippines

These placements have always been made to address genuine skill shortages.

On each occasion, the companies we worked with paid the going market rates and treated sponsored professionals as equals — not as a source of "cheap labour."

In fact, once you add up the admin, legal work, and red tape, it often costs more than hiring a UK national.

The data that undoes that 'cheap labour' claim

And since April 2025, that price tag has only climbed.

• The visa application fee (as an employer) for roles sits at a flat fee of:

£525

• Over a standard three-year visa, The Immigration Health Surcharge adds another:

£1,035 a year — £3,105.

• Then there's the Immigration Skills Charge for employers, which is £1,000 for the first year and £500 for each subsequent 6-month period, amounting to:

£2,000 over three years for medium or large sponsors.

• Add legal fees and the Certificate of Sponsorship (CoS) fee.

In total, sponsoring a Skilled Worker for three years comes in at around:

£8,000.

And that's before you even get to additional costs like relocation, onboarding, and/or training.

Sorry to all the impassioned social media posters and keyboard warriors, but that's hardly "cheap labour."

How many skilled workers have entered the UK to carry out technology jobs?

According to the Home Office, the number of Certificate of Sponsorships Assigned, across 15 different categories of IT professionals ranging from "IT project manager" to" Web design professional," surged:

• From 43,497 in 2021
• to 55,372 in 2022

This uptick in skilled IT professionals incoming to the UK mirrors the post-pandemic rebound, when businesses reignited projects, with hiring accelerating across the tech sector.

But that growth in skilled, UK employer-sponsored technologists from abroad didn't last.

By 2023, the number of sponsored IT professionals from overseas had slipped back to roughly 2021 levels, signalling a slowdown.

The downward trend has continued into 2025, with early-year data (up to March 31st 2025) pointing to an estimated 36% decline compared to 2022.

What about overseas skilled tech worker pay in the UK?

The Skilled Worker visa salary threshold set by the Home Office in IT is £37,500, below the UK's average IT salary of £47,500.

On paper, that looks like a loophole for cheaper hiring.

But in practice, it doesn't play out that way. Following a Freedom of Information (FoI) request that we filed in July 2025, the Home Office data revealed that:

Skilled Worker visa holders in tech roles were actually paid more on average than UK permanent employees in equivalent tech jobs.

Yes, most of these overseas professionals are mid to senior level — not juniors — but that only reinforces the point; UK companies are paying a premium for specific skills they can't easily find locally.

Far from driving down wages, the Skilled Worker route operates as a premium recruitment channel, not a discount store. Contrary to some rhetoric you might hear, they are actually driving average IT worker salaries up.

So where does that leave British IT contractors?

Supply and demand still matter.

If more skilled professionals are available in the market, even if they are permies and on higher salaries, contractor rates might not rise as quickly as they would in a tighter market. That's basic economics.

But that doesn't mean overseas talent is "taking" contractor work.

Contractors and Skilled Workers fill different needs.

Contractors bring agility, short-term expertise, and immediate problem-solving power.

Skilled Workers, like all permies, are part of companies' longer-term strategies — embedding knowledge internally, stabilising delivery, and building sustainable teams. The two coexist in the same ecosystem, but with different purposes.

The bigger picture

Some might celebrate the decline in IT worker visa numbers, assuming it'll create more opportunities for UK contractors. With current market conditions, I can see why. However, this downturn won't last forever, and there are wider consequences to this way of thinking.

If fewer overseas specialists enter the market, UK businesses risk falling behind — losing the expertise needed to innovate, deliver, and compete globally. A smaller, more insular tech workforce might suit a few IR35-hit limited company contractors in the short term, but it doesn't serve the broader UK economy — or, ultimately, the contracting community that depends on a thriving tech sector.

The bottom line

Let's separate myth from market reality.

Skilled Worker visa holders are not "cheap labour."

In fact, they usually cost UK employers more — both financially and administratively.

We can't ignore the fundamentals of supply and demand. A higher volume of available skilled professionals, even at higher salaries, could still slow the pace of contractors' pay rate growth. That's not because overseas workers are undercutting the market — it's simply how the economics of supply play out. You can read where I believe the real challenges for UK IT contractors lie in this Contractor UK article.

Final thoughts

Contractors are increasingly correct to recognise that while overseas talent might temper short-term rate rises, it also fuels a healthier, more dynamic UK tech industry. A strong, competitive tech ecosystem benefits everyone — employers, Skilled Workers, and UK IT contractors alike.

So rather than viewing immigration as a threat, perhaps we should see it for what it really is. It's a recalibration of the market that strengthens UK plc in the long term. Skilled Workers aren't the reason rates are stagnating — they're part of the reason that Britain's technology industry keeps moving forward.