The jobless crisis in Britain is more serious than thought. New estimates reveal that over 400,000 people have left the workforce due to long-term illness at a record high.
According to the Office for National Statistics, there are 9.25 million people between 16 and 65 that are neither working nor searching for work. They are therefore officially classified as “economically unemployed”.
The official figures have been revised upwards due to the fact that the adult population has increased by almost 750,000 compared to what was previously estimated, mainly because of the increase in immigration.
There are now 172,000 people more employed than was previously thought, and 30,000 unemployed. In addition, there are an additional 414,000 people who are inactive due to a rising trend of long-term illness.
This is a record-breaking number of people who have left the job market due to their health. Around 200,000 more than was previously estimated. This is partly due to an increase in older workers who are more likely to be ill.
Former cabinet members said that the figures highlighted the urgency required by Rishi to tackle the issue of unemployment. Tory leader Sir Iain Duncan Smith stated: “Long-term sickness has spiraled since Covid.”
The Government should focus all its efforts on getting them to apply for Universal Credit, so that they can be encouraged to return to work. They also need to cut taxes in order to encourage those with middle-incomes to do the same. The best way to escape poverty is through work.
Sir John Redwood said that unless there is action, the balance will be affected between those out of work receiving pensions and benefits, and those working and paying taxes to cover these.
This encourages governments and employers to allow more legal migrants in, which is cheaper for the employer, but expensive for taxpayers because it will result in extra spending on health care and social housing etc. “We already pay for the needs of those who are here in terms of public services.”
Sir John said that these figures may also make it more difficult for the Bank of England, which has been at a record high of 5,25pc since 16 years ago, to reduce interest rates.
He said that the fact that income tax and work tax revenues are down while public spending is on the rise leads to larger deficits, which makes it more difficult to lower interest rates.
Andrew Bailey, Governor of the Bank, expressed concern that the tight job market could lead to high salaries, which would fuel inflation.
Huw Pill said that it is “premature” at this time to talk about rate cuts. However, he did note that “the outlook for monetary policies has changed” and that it’s now a matter of “when” rather than “if” the Bank will begin loosening its policy.
As the underlying inflationary pressures in the United States begin to subside, “we can start to reduce” rates.
ONS found that there are more women working than was previously believed. Women are more likely than men to take time off work to look after relatives. This has led to an increase of 108,000 people looking after their homes or families.
Additional 142,000 students are also enrolled.
The Institute for Employment Studies’ Tony Wilson said that the increased sickness is a sign of the economy losing out on growth.
It means that the economy is not performing well. We could do better. “We could increase the number of people employed, produce more and have a stronger economy if we were better at helping people prepare for jobs, find work and stay in it,” he said.
The new data indicates a rate of unemployment of 3.9pc. This is lower than the previous estimate, which was 4.2pc.
George Buckley said that the Bank could see “a tighter labor market, which would mean fewer workers available, and this would lead to a higher upward pressure on wages”.
He said that it was good for the cause if the MPC kept rates at the same level.
Banks may also be tempted to raise rates if they see signs of economic strength.
New data shows that the UK services sector has grown at the fastest rate since May 2023 as a result of the hopes for rate cuts.
The third consecutive month of growth was driven by consumer and business confidence as anticipations of interest rate reductions from the Bank of England this year drove a surge in new orders.
In France and Germany, on the other hand, fears of stagflation are fueled by low production and high labour costs.
There are still signs that the cost-of-living crisis continues to affect families’ finances.
According to the British Retail Consortium, retail sales were up by 1.2pc in January compared to 2023. The British Retail Consortium reports that this is lower than the inflation rate, which means households are spending more to get fewer products. Families increased their spending on food by 6.3%, but cut back on other goods by 1.8%.
EY also warned that refinancing debt would cost British companies up to an additional 25bn pounds sterling due to higher interest rates.
The Big Four accountants said that refinancing cost has risen up to 6pc in the last six years, since the Bank of England raised interest rates. This was done to control the inflation surge after the pandemic.
The UK listed companies are now preparing for the refinancing of £500bn in lending over three years.
The Centre for Economics and Business Research has issued a new warning that Britain is facing a record number insolvencies as companies who were hard hit by the pandemic have closed their doors.