Budget 2023: UK economic inactivity explained in charts - as East Midlands sees 18% rise in workers leaving jobs market

More people have dropped out of the jobs market in the Midlands than anywhere else in the UK, with economic inactivity up a whopping 18% in the East Midlands alone compared to before Covid.

NationalWorld’s analysis comes as Chancellor Jeremy Hunt announced a range of measures to boost workforce participation among the over-50s, parents, the long-term sick and benefit claimants as part of his Spring Budget, following mounting concern about rising levels of economic inactivity in the UK.

“We could fill half the vacancies in the economy with people who say they would like to work despite being inactive due to sickness or disability,” Mr Hunt said, while announcing reforms to disability benefits and other measures designed to “remove barriers that stop people who want to form working”.

A person is defined as economically inactive if they are unemployed and have not been looking for work within the last 4 weeks, or are unable to start work within the next two weeks. It includes early retirees, students, homemakers and long-term sick or disabled people, alongside people not looking for work for any other reason.

Office for National Statistics (ONS) figures show economic inactivity is highest in Northern Ireland, with 26.4% of 16 to 64 year olds out of the labour market between November 2022 and January 2023. This was followed by Wales and the North East of England, at 24.9%, and the North West and Yorkshire and the Humber on 22.8%.

But our analysis shows it is the Midlands region of England that has seen the biggest growth in this group compared to the three months to February 2020, the last pre-pandemic period in the ONS data, with an extra 165,750 people becoming economically inactive – a rise of 12.6%.

The East Midlands was worst affected, with the pool of inactive people growing by a massive 17.8%. It meant around 100,000 extra people have left the labour market in this region alone – a fifth of the UK’s total of 488,000.

Across the UK as a whole, the number of economically inactive people has grown by 5.8% during the same period, from 8.4 to 8.9 million.

Long term sickness is the most common reason given for people leaving the workforce – and it is this group that has been driving the rise in inactivity across the UK. The numbers have been increasing since before the start of the Covid pandemic.

Within England, economic inactivity is currently highest in the northern regions, at 23.2% compared to 19.4% in the southern regions. At a national level, inactivity is highest in Northern Ireland (26.4%) followed by Wales (24.9%) and Scotland and England (21%).

Wales has seen the sharpest rise of any nation compared to pre-Covid, with the population of economically inactive people up by 7.9%, followed by England at 6.8%. Scotland meanwhile has seen a drop – the number of economically inactive people has fallen by 21,300, or 2.9%.

The Royal College of Nursing (RCN) said ill health linked to long NHS waiting lists is a “primary driver” of economic inactivity, as it criticised the lack of focus on the health system in the Chancellor’s budget.

“Only by investing in the NHS and those who keep it running, will we have a healthy population to boost the economy,” said RCN director for England, Patricia Marquis.

Researchers from the House of Commons Library say all G7 countries saw a rise in economic inactivity after Covid lockdown restrictions were introduced – but in all other countries the trend has largely reduced, with the UK alone seeing a continued rise.

The Health Foundation think tank says rising levels of economic inactivity among older age groups is a concern because these people are very unlikely to return to the workplace. “That likelihood becomes lower still when in combination with poor health,” it said, in a report  published last October.

The research concluded that long Covid and hospital waiting lists are contributing factors, which are “exacerbating a pre-pandemic trend of increasing prevalence of poor health, and of poor health as a reason for inactivity”.

Besides changes to the disability benefit system billed as “the biggest change to our welfare system in a decade” – a move the Chancellor said will see the Work Capability Assessment abolished and benefit entitlement separated from an individual’s ability to work, allowing disability benefit claimants to seek work without fear of losing financial support – Mr Hunt also announced measures to help workers over 50 back into the workplace.

“Fully 3.5 million of pre-retirement age over 50 are not part of the labour force, an increase of 320,000 since before the pandemic,” he said. “We now have the 23rd highest inactivity rate for over 55s in the OECD [Organisation for Economic Co-operation and Development]. If we matched the rate of Sweden, we would add more than one million people to our national labour force.

“Older people are the most skilled and experienced people we have. No country can thrive if it turns its back on such a wealth of talent and ability.”