Britain’s worklessness crisis will continue for years to come because of a failure to address the rise in long-term sickness, the Confederation for British Industry (CBI) has warned.
The trade body has predicted that labour force participation will not recover to its pre-Covid level in either 2024 and 2025, even as the economy returns to growth.
Lead economist Alpesh Paleja said: “We do expect the participation rate to recover particularly next year but it doesn’t quite get back to where it was before Covid.”
Ms Paleja said the main cause was the high level of people out of work because of long-term sickness.
The number of working-age people forced to leave the labour market because of long-term sickness has risen by 700,000 since the onset of Covid to 2.8 million.
Mr Paleja said: “We know that long-term health issues have played a role and they don’t seem to have receded.”
The sharp rise in people dropping out of the workforce since the pandemic has alarmed ministers. There are now 9.4 million classed as economically inactive – meaning neither working nor job seeking.
The CBI said many of its members had complained about hiring difficulties.
The group has long called for the Government to introduce tax breaks for employers who offered private healthcare to staff in a bid to tackle the health crisis.
Chief economist Louise Hellem called it the “missing piece of the puzzle” but said there had been “little movement from the Government”.
The trade body on Friday raised its forecast for growth amid signs of economic recovery.
The CBI now expects the economy to expand by 1pc this year and 1.9pc in 2025, up from previous forecasts of 0.8pc and 1.6pc respectively.
Families starting to spend more money as inflation fades and wages grow are set to deliver the largest boost to growth, it said.
Inflation will return sustainably to the Bank of England’s target in 2025, according to its analysis.
However, the CBI warned that political leaders risked upsetting this trajectory if they followed through on pledges to significantly curb immigration after the election.
Both Sir Keir Starmer and Rishi Sunak have said they would make it tougher to move to Britain, amid near record high levels of net migration.
Ms Hellem warned that this would create problems for employers reliant on migrant workers, who are already struggling to hire.
She said: “One of the big risks around this is the pressure on employers in terms of labour shortages.
“That is potentially one of the upside risks in terms of inflation if you don’t see some of those wage pressures and some of that labour market tightness receding.
“We have real kind of skill shortages in specific areas, particularly around digital skills.”
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