A queue of ambulances outside the Royal London Hospital emergency department on Nov. 24, 2022, in London. Within the U.K., the variety of “economically inactive” people — those neither working nor searching for a job — between the ages of 16 and 64 rose by greater than 630,000 since 2019.
Leon Neal/Getty Images
LONDON — Together with sky-high inflation and energy costs, a Brexit-related trade tailspin and a recession in progress, the U.K. economy is being hammered by record numbers of employees reporting long-term sickness.
The Office for National Statistics reported that between June and August 2022, around 2.5 million people cited long-term sickness because the essential reason for economic inactivity, a rise of around half 1,000,000 since 2019.
The variety of “economically inactive” people — those neither working nor searching for a job — between the ages of 16 and 64 has risen by greater than 630,000 since 2019. Unlike other major economies, recent U.K. data shows no sign that these lost employees are returning to the labor market, whilst inflation and energy costs exert huge pressure on household funds.
The U.K. avoided mass job losses through the Covid-19 pandemic as the federal government’s furlough program subsidized businesses to retain employees. But since lockdown measures were lifted, the country has seen a labor market exodus of unique proportions amongst advanced economies.
In its report last month, the ONS said a variety of things may very well be behind the recent spike, including National Health Service waiting lists which might be at record highs, an aging population and the consequences of long Covid.
“Younger people have also seen a few of the largest relative increases, and a few industries similar to wholesale and retail are affected to a greater extent than others,” the ONS said.
Though the consequences of the problems mentioned above have not been quantified, the report suggested the rise has been driven by “other health problems or disabilities,” “mental illness and nervous disorders” and “problems connected with [the] back or neck.”
Legacy of austerity
Jonathan Portes, professor of economics and public policy at King’s College London, told CNBC the dimensions of the labor market depletion is probably going a mix of long Covid; other pandemic-related health issues similar to mental illness; and the present crisis within the NHS.
On top of that, he noted that aspects that hurt public health directly — similar to increased waiting time for treatment — could have a knock-on effect: people could have to depart the workforce to look after sick relatives.
“It’s value remembering the U.K. has been here before, arguably at the very least twice. Within the early Nineteen Nineties, the U.K. saw a pointy recovery, with falling unemployment, after ‘Black Wednesday,’ however it also saw a big, and lasting, rise within the number of individuals claiming incapacity-related advantages,” Portes said, adding that not working is mostly bad for each health and employability.
“The federal government clearly is not doing very much about this. Other than resolving the crisis within the NHS, the opposite key policy area is support for sick and disabled people to get back to work, and there is not nearly enough happening on this — as an alternative the federal government is harassing people on Universal Credit with penalties and sanctions which we all know don’t help much.”
Hunt also announced a review of the problems stopping re-entry into the job market and committed £280 million ($340.3 million) to “crack down on profit fraud and errors” over the following two years.
Although the pandemic has greatly worsened the health crisis leaving a hole within the U.K. economy, the rise in long-term sickness claims actually began in 2019, and economists see several possible explanation why the country has been uniquely vulnerable.
Portes suggested that the federal government’s austerity policies — a decade of sweeping public spending cuts implemented after Former Prime Minister David Cameron took office in 2010 and geared toward reining within the national debt — had a major part to play in leaving the U.K. exposed.
“The U.K. was particularly vulnerable due to austerity — NHS waiting lists were rising sharply, and performance/satisfaction was falling sharply, well before the pandemic,” Portes said.
“And support for those on incapacity and disability advantages was hollowed out within the early 2010s. More broadly, austerity has led to a sharper gradient in health outcomes by income/class.”
Inequality and surging waiting lists
That is borne out within the national data: The ONS estimates that between 2018 and 2020, males living in essentially the most deprived areas of England on average live 9.7 years fewer than those within the least deprived areas, with the gap at 7.9 years for females.
The ONS noted that each sexes saw “statistically significant increases within the inequality in life expectancy at birth since 2015 to 2017.”
Within the aftermath of the pandemic, NHS waiting lists grew at its fastest rate since records began in August 2007, a recent House of Commons report highlighted, with over 7 million patients on the waiting list for consultant-led hospital treatment in England as of September.
Nevertheless, the report noted that this is not a recent phenomenon, and the waiting list has been growing rapidly since 2012.
“Before the pandemic, in December 2019, the waiting list was over 4.5 million – almost two million higher than it had been in December 2012, a 74% increase,” it said.
“In other words, while the rise in waiting lists has been accelerated by the pandemic, it was also happening for several years before the pandemic.”
Former Bank of England policymaker Michael Saunders, now a senior policy advisor at Oxford Economics, also told CNBC that the U.K. has been particularly badly affected by Covid when it comes to severity, and that a few of this will have been the results of the country’s higher rates of preexisting health conditions — similar to obesity — which could have been exacerbated by Covid.
“The U.K. is a comparatively unequal country, so which may be a part of the rationale why even when we have had the identical Covid wave as other countries, we’d get a much bigger effect on public health, because in case you like you have got a greater tail of people that could be worst affected by it,” he added.
Saunders suggested that any growth strategy from the federal government should include measures to deal with these health-care challenges, which at the moment are inextricable from the labor participation rate and the broader economy.
“It isn’t only a health issue, it’s an economic issue. It is vital in each ways. I believe it is important enough as a health issue, however it merits extra importance due to the consequences on potential output which then feed through to those other economic problems.”