More than a fifth of working-age adults in the UK remain out of work or not actively seeking employment, according to official figures, highlighting a key challenge for the government as it aims to boost economic growth.
The UK’s economic inactivity rate stood at 21.5% in the three months to January, a slight decline from both the previous quarter and the same period last year. Despite the decrease, the figure remains a focal point as ministers roll out measures to address long-term unemployment and workforce participation.
The data comes in the wake of controversial government plans to cut sickness and disability benefits, a move aimed at saving £5 billion annually by 2030. The government argues that the reforms will encourage employment while safeguarding those genuinely unable to work. However, the plans have been met with significant backlash from Labour backbenchers, trade unions, and charities, who fear they could exacerbate financial struggles for disabled individuals.
Work and Pensions Secretary Liz Kendall acknowledged the ongoing employment challenges, stating that the figures “demonstrate the scale of the challenge we’re still facing to get Britain working again.”
Labour has set a target of achieving an 80% employment rate, up from the current 75%. To support this goal, the Keep Britain Working review, led by former John Lewis boss Sir Charlie Mayfield, has been examining how employers can better support individuals with health and disability concerns.
Mayfield emphasized the need for a workplace culture shift, urging employers to create environments where individuals feel comfortable discussing their needs. “The UK needs to move from a disjointed system that focuses on what people can’t do to one that focuses on what they can do,” he told the BBC. “Being off work is not always the solution.”
The review found that 8.7 million people in the UK have a work-limiting health condition, a rise of 2.5 million over the past decade. This includes 1.2 million individuals aged 16 to 34 and 900,000 aged 50 to 64. The report also highlighted that individuals unemployed for less than a year are five times more likely to return to work compared to those out of work for longer periods.
Economic inactivity has been particularly pronounced among 18- to 24-year-olds since the pandemic, according to the Office for National Statistics (ONS). However, overall inactivity rates fell by 0.6% over the past year and by 0.2% in the last quarter, largely due to more individuals aged 35 to 49 seeking employment.
The ONS cautioned that its employment data should be interpreted carefully due to low survey response rates but noted that economic inactivity has generally declined since records began in 1971.
Currently, 9.27 million people are classified as economically inactive for reasons such as long-term illness, studying, retirement, and caregiving responsibilities. The number increased during the COVID-19 pandemic and has fluctuated since.
Meanwhile, wage growth has continued to outpace inflation. Excluding bonuses, wages grew by 5.9% year-on-year in the last quarter, with retail, hospitality, and construction sectors seeing notable increases. In real terms, accounting for inflation, regular pay rose by 2.2%.
Redundancies, however, saw an uptick for the first time in a year, reaching 124,000 in the three months to January.
The Bank of England closely monitors employment and wage data when making interest rate decisions. In its latest meeting, the central bank opted to maintain interest rates at 4.5%.
