More than a fifth of working-age adults in the UK are neither employed nor actively seeking work, according to the latest figures from the Office for National Statistics (ONS).
The UK’s economic inactivity rate stood at 21.5% in the three months to January 2024, a slight drop from the previous quarter and year. Despite the decline, the number of economically inactive people remains high, fueling government efforts to boost employment and economic growth.
These figures come just days after controversial benefit cuts were announced and ahead of Chancellor Rachel Reeves’ Spring Statement, where she will outline her economic strategy.
Government Announces £5bn Cuts to Sickness & Disability Benefits
The government has proposed sweeping cuts to sickness and disability benefits, aiming to save £5 billion annually by 2030. The reforms are designed to encourage more people to work while protecting those who are unable to do so.
However, the changes have sparked fierce backlash from Labour backbenchers, unions, and disability charities, who warn that they could push more disabled individuals into poverty.
Work and Pensions Secretary Liz Kendall acknowledged the employment challenges, stating:
“These figures demonstrate the scale of the challenge we’re still facing to get Britain working again.”
Labour has set an employment rate target of 80%, but it currently stands at 75%.
UK Workforce Report Highlights Key Employment Challenges
The Keep Britain Working review, led by former John Lewis boss Sir Charlie Mayfield, examined barriers to employment and how employers can support individuals with health conditions.
Key findings include:
• 8.7 million people in the UK have a work-limiting health condition—an increase of 2.5 million in the past decade.
• This includes 1.2 million young adults (16-34 years old) and 900,000 older workers (50-64 years old).
• People out of work for less than a year are five times more likely to return to employment than those unemployed for longer.
Mayfield stressed the need for a shift in workplace culture, stating:
“Employers need to create the environment so people can talk about the help they might need. The UK must move away from a system that focuses on what people can’t do and instead focus on what they can do.”
UK Economic Inactivity Rate Falls Slightly But Remains a Concern
The latest ONS figures reveal that economic inactivity has been falling since the Covid-19 pandemic, but it remains higher than pre-pandemic levels.
Currently, 9.27 million people in the UK are classified as economically inactive due to:
• Long-term illness
• Studying
• Early retirement
• Caring responsibilities
Notably, inactivity fell by 0.6% over the past year and 0.2% in the last quarter, primarily due to more people aged 35-49 re-entering the workforce.
Pay Growth Outpaces Inflation, But Redundancies Rise
Despite employment challenges, wages continue to rise, outpacing inflation:
• Average wages (excluding bonuses) increased by 5.9% in the last quarter.
• Retail, hospitality, and construction sectors saw the highest wage growth.
• In real terms (adjusted for inflation), regular pay rose by 2.2%.
However, redundancies rose for the first time in a year, with 124,000 job losses reported between November 2023 and January 2024.
Bank of England Holds Interest Rates at 4.5%
The Bank of England closely monitors the job market and wage growth when making interest rate decisions. On Thursday, the central bank held interest rates at 4.5%, citing ongoing concerns about inflation and employment trends.
As the UK government pushes workforce reforms and benefit cuts, all eyes are now on the Spring Statement, where Rachel Reeves is expected to outline further economic policies.
With economic inactivity still high, the debate continues: Will government policies drive more people back to work, or will they increase financial hardship for vulnerable groups?
