Britain has a sick economy and it is getting sicker. The clear message from last week’s raft of economic data is that the UK is being held back by the growing number of people not able to work because of long-term illness.
There are many theories about why the trend is worsening. Possible factors include long Covid, delays in NHS treatment as waiting lists grow longer, poor workplace practices, stress and the impact of austerity.
But one thing is certain. The economic impact of ill health is a headache for Jeremy Hunt. It will be a headache for Rachel Reeves if she becomes the first female chancellor. It is a headache for every business that is struggling to fill vacancies.
Figures released last week by the Office for National Statistics illustrated the extent of the problem. The number of people saying they are inactive due to long-term sickness is now 2.8 million – an increase of more than 200,000 in the past year and of 700,000 since the pandemic started in 2020.
This matters, and not just for those who would be working if their circumstances were different. This high level of long-term illness helps explain why the UK’s workforce is 700,000 smaller than its pre-Covid level, why the labour market is so tight and why the economy is flatlining.
Jane Gratton, deputy director of public policy at the British Chambers of Commerce, said: “Businesses are growing increasingly concerned about higher levels of inactivity and its economic impact. It is impacting on growth and inflation. Wages are rising because of skills shortages. This has an effect on both employers and individuals.”
This is not a new issue. Large numbers of employees were invalided out of the workforce when factories and coalmines were closed in the de-industrialisation of the 1980s and 1990s. This century, Britain has had a higher percentage of people inactive due to ill health than Germany, France or Italy. But two new factors – Covid and longer NHS waiting lists – have made matters significantly worse in recent years.
Yet what’s especially worrying for economic policymakers is that Britain has gone from being the G7 country with the lowest levels of inactivity to the one where, uniquely, the workforce has yet to return to pre-pandemic levels.
The Office for Budget Responsibility has pointed out: “The available international evidence suggests that while the UK has consistently been a strong performer internationally in terms of working-age participation, its post-pandemic rise in inactivity stands out. And ill health has consistently been a bigger factor behind inactivity in the UK than in most other advanced economies, with post-pandemic trends likely to have amplified these differences.”
While it would be tempting to dub Britain the sick man of Europe, it would not be strictly accurate. Feminist thinktank the Women’s Budget Group (WBG) has pointed out that there are 200,000 more women than men inactive due to ill health (1.5 million against 1.3 million). The WBG says this is not just down to Covid, but continues a trend that was evident before the pandemic.
Zubaida Haque, the WBG’s deputy director, said women were more likely to be in low-paid jobs and suffering the impact of austerity. “This has not been happening in a vacuum. Women were hit disproportionately by the pandemic but they were also more severely impacted by the benefit cuts made between 2010 and 2020. It is no good the government trying to deal with the symptoms of the problem.”
Hannah Slaughter, senior economist at the Resolution Foundation thinktank, said the 2.8 million people inactive due to long-term sickness were a real concern: “This is holding back the economy, putting pressure on the public finances and the NHS, and limiting opportunities for too many people. Reversing this trend will be a priority for the current and next government.”
According to the Department for Work and Pensions, the government is already on the case. A spokesperson said: “With an extra 4 million people in work since 2010, we are now going even further, with welfare reforms forecast to reduce the number of people who would otherwise have been placed in the highest tier of incapacity benefits by over 370,000.
“Our back to work plan will help over a million people, including those with disabilities and long-term health conditions, to start and stay in work, as we continue to bring down inflation, cut taxes and grow the economy.”
One option for the government would be to try to fill the hundreds of thousands of job vacancies by tightening welfare conditions. But experts such as Ben Harrison, director of the Work Foundation thinktank, have warned that forcing people into work through punitive benefit sanctions would be counterproductive and might lead to more ill health.
Whichever approach it decides to take, the government is under pressure to do more, both in terms of preventing illness, and in tailoring back-to-work programmes for those who take time off sick, ensuring that they don’t exit the labour market altogether. While it is inactivity due to ill health that has grabbed the headlines recently, plenty of people with health problems are working, and are more likely to carry on if they get appropriate support.
A study by the left-leaning Institute for Public Policy Research thinktank found people were more likely to leave work because of a heart condition than for any other health problem. The IPPR said someone suffering the onset of cardiovascular disease (CVD) in 2021-22 had a 22% likelihood of leaving their job, compared with 14% for those with a mental health problem and 16% for those diagnosed with cancer.
Chris Thomas, head of the IPPR’s commission on health and prosperity, said: “After great strides in tackling cardiovascular disease in the 20th century, the UK is now stalling, if not reversing. This is costing not just lives, but also livelihoods. The good news is that heart disease is one of the most preventable health conditions, but the government has to get on to the front foot and deliver proactive policies. Both human lives and economic prosperity depend on it.”
Gratton at the BCC said firms could help by allowing flexible working, investing more in occupational health and offering staff medical insurance.
Jon Boys, senior research economist at the Chartered Institute of Personnel and Development, said the reduction in workers was compounding labour supply difficulties and limiting growth.
There was ample evidence of both in last week’s economic data, with the ONS reporting more than 900,000 job vacancies and unemployment below 4%, at a time when the UK economy was in recession. Boys said breaking down barriers to working for people with health problems should be a priority for policymakers and employers.
Like Gratton, he said it was vital to focus on occupational health, to prevent individuals from exiting the workforce prematurely: “It is all very well getting people back into work but the bigger issue is not allowing them to fall out of it in the first place.”
Boys said both government and employers needed to address inactivity: employers through an awareness of the impact of stress in the workplace and addressing heavy and unsustainable workloads, and ministers by tackling NHS waiting lists.
“The government has to recognise that health policy is economic policy,” Boys said. “They can’t be treated in silos.”
