The UK’s economic inactivity has surged to its highest level in 13 years. Over 9.4 million adults are now neither working nor seeking work.
This alarming trend raises concerns about the future of the UK economy, with long-term sickness and rising unemployment emerging as key issues.
Rising Economic Inactivity
According to the Office for National Statistics (ONS), the number of adults not in employment or seeking work has increased significantly. In the three months leading up to April, more than 9.4 million individuals were classified as economically inactive. This is the highest figure since the post-financial crisis era of 2011.
Of the economically inactive, a record 2.83 million people attributed their status to long-term sickness. This concerning surge in long-term illness is one of the primary drivers behind the increase in economic inactivity.
Employment and Unemployment Trends
During the same period, employment levels fell by 139,000, while unemployment rose by a similar number. Now, over 1.5 million people are unemployed, the most since 2021.
Tony Wilson, director of the Institute for Employment Studies, highlighted the severity of the situation, stating that the UK is nearly alone among developed economies in experiencing a decline in employment rates since the pandemic.
Impact on Businesses
Alexandra Hall-Chen from the Institute of Directors expressed concerns from a business perspective. She noted that nearly half of businesses are struggling to find the necessary staff due to the increasing number of people exiting the job market.
Without action to increase the domestic labour supply, strong economic growth will be all but impossible. This sentiment underscores the critical need for policy intervention.
Wage Growth and Interest Rates
ONS data showed unexpected wage growth in the last quarter, complicating the Bank of England’s plans to reduce interest rates this summer. Average regular earnings rose by 6% over the past year, partly driven by a nearly 10% increase in the minimum wage.
Economists suggest that this wage pressure makes it unlikely for the Bank of England to cut interest rates before the election. Simon French of Panmure Gordon remarked that wage growth remains “too hot” to justify reducing borrowing costs.
Political Reactions
Labour’s shadow work and pensions secretary, Liz Kendall, criticised the Conservative government’s handling of the worklessness crisis. She emphasised the record number of people out of work due to long-term sickness under Rishi Sunak’s administration.
The Conservative manifesto promises to “tighten up how the benefits system assesses capability for work.” From September 2025, those with moderate mental health issues or mobility problems will receive tailored support to help them engage with the workforce.
Future of the Labour Market
The escalating issue of worklessness and economic inactivity presents a significant challenge for policymakers. Their aim is to revitalise the UK’s labour market and ensure sustainable economic growth.
Stabilising rising costs and bringing people back into the workplace are crucial steps for the next government. These measures are vital for tackling the economic inactivity crisis.
The surge in economic inactivity is a pressing issue that needs immediate attention from policymakers.
Addressing long-term sickness, enhancing labour supply, and stabilising wage growth are essential measures for revitalising the UK economy.