Government pledges to tackle soaring UK economic inactivity

Spiralling levels of economic inactivity in Britain’s workforce are set to be tackled by the Government as it pledged to address the “greatest employment challenge of a generation”.

Work and Pensions Secretary Liz Kendall assembled experts on a new Labour Market Advisory board for the first time this week to look at ways to help the Government meet its target to reach an 80% employment rate.

It comes as a report published separately on Tuesday estimates that UK economic output could increase by up to £177 billion – 2% to 3% – in 2029 if between a half and three quarters of those who have dropped out of the workforce since 2020 citing ill health were reintegrated.

The report by the BCG Centre for Growth and the NHS Confederation showed that economic inactivity has soared by 900,000 to 2.8 million since before Covid in 2020, with 85% of this due to those who are long-term sick.

About 375 million work days have been lost annually since 2020 due to people being out of the workforce due to long-term sickness, it added.

Official figures on Tuesday will also show the latest UK unemployment rate and economic inactivity levels over the three months to July.

The inaugural meeting of the Government’s new advisory board – made up of labour market experts from across business, industrial relations and academia – looked at the impact of ill-health on inactivity and how the Government can support more people into jobs.

It aims to offer new approaches to look at how to tackle the root causes of people remaining out of work.

Ministers are set to announce major reforms in the Get Britain Working White Paper due this autumn.

Ms Kendall, said: “Spiralling inactivity is the greatest employment challenge for a generation, with a near record 2.8 million people out of work due to long-term sickness.

“Addressing these challenges will take time, but we’re going to fix the foundations of the economy and tackle economic inactivity.

“The board’s knowledge, expertise and insight will help us to rebuild Britain as we deliver our growth mission, drive up opportunity and make every part of the country better off.”

The UK is the only country in the G7 group of nations whose employment and inactivity rates have not returned to pre-pandemic levels.

The report by the BCG Centre for Growth and the NHS Confederation showed that on average, EU countries have seen economic inactivity fall by 2.3 percentage points, while the UK’s has risen by 1.1 percentage points.

Paul Gregg, chair of the Labour Market Advisory board, said: “It is clear that the current labour market faces a deep-seated set of challenges.

“We have seen a sharp increase in economic inactivity and long-term sickness, most notably in our young people post-pandemic.

“Further, real wage growth has been heavily supressed for 15 years hitting living standards and government tax revenues.

“Reversing these trends will be key to ensuring the long-term prosperity of the UK’s labour market.”

Tuesday’s labour figures from the Office for National Statistics (ONS) are also seen as key, as the total earnings rise is used to determine the “triple lock” guarantee for the state pension.

The state pension increases every April in line with the highest of average earnings growth in the year from May to July of the previous year, CPI inflation in September of the previous year, or 2.5%.