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Long-term sickness surges to record high as labour crisis deepens

Workers
Workers

The number of workforce dropouts claiming to suffer long-term sickness has surged to a record high as Britain’s labour crisis deepens.

More than 2.8 million people say they are too ill to work, the highest number since records were first collected by the Office for National Statistics (ONS).

In total, 9.4 million people aged between 16 and 64-years old are economically inactive – neither in work, nor looking for work – according to the ONS, with long-term sickness the most common reason for inactivity. That is the highest number since 2012, in the aftermath of the financial crisis.

At the same time the jobs figures risk complicating the Bank of England’s plans to cut interest rates after pay growth proved stubbornly high.

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Average regular earnings in the three months to February were up by 6pc on the year. This represents a slowdown from the previous pace, but shows wages are growing more quickly than economists had anticipated.

Ben Harrison, director of the Work Foundation at Lancaster University, said Britain has become “an international outlier with participation rates below pre-Covid levels”.

He said: “Since December 2019 to February 2020, 717,000 people have become economically inactive due to ill health and the tide is not turning.

“As we get closer to a general election, supporting more people who are long-term sick into secure and sustained employment will be one of the central challenges of the next Government.”

Inactivity has also been driven by a rise in studying, with 2.6 million students, while the number of workers taking early retirement has edged up to 1.1 million.

Jane Gratton at the British Chambers of Commerce said businesses will struggle unless more potential workers are brought back into the jobs market.

She said: “We are concerned by the growing number of people not looking for work, with a large chunk of those out of action due to long-term health issues. More must be done to help people with ill health stay in work and to help employers understand how best to support them.

“Until we get more people permanently back into the workplace then the upside risks of higher inflation and interest rates will remain.”

Meanwhile, sustained pay growth suggests inflationary pressures from the jobs market are cooling more slowly than the Bank of England may wish. Officials led by governor Andrew Bailey have raised interest rates in an effort to bring down the pace of price rises, particularly in the services sector, where wages are especially important.

Inflation has fallen sharply, from a peak of 11.1pc in October 2022 to 3.4pc in February.

After adjusting for price rises, pay packets are up 2pc in real terms, the ONS said, marking the fastest growth in earnings since September 2021.

The number of people in work in the three months to February dropped below 33 million for the first time since October 2022.

Unemployment, which covers those who do not have a job but are searching for one and are able to start quickly, rose back above 1.4 million.

It takes the unemployment rate to 4.2pc, up from below 4pc three months earlier.

There are still jobs available: the total number of vacancies on offer rose from 886,000 in February to 937,000, the ONS said.

This indicates a degree of stability after a long slide in the number of positions available since the pandemic peak of more than 1.3 million.

Paul Dales at Capital Economics said the Bank of England should be able to cut interest rates in June, from the current level of 5.25pc.

He said: “If it wasn’t for the clear weakening in activity in the labour market we’d be a bit worried that the UK’s disinflation process is grinding to a halt like in the US.

“But with employment falling sharply and the unemployment rate climbing, we suspect wage growth will continue to ease in the coming months. That may allow the Bank to cut interest rates in June, even if the Fed doesn’t move until September.”