Inactivity puts a strain on regional UK labour markets

In most UK regions and nations, inactivity levels have risen since the beginning of the pandemic, and an increasing number of inactive individuals are reporting long-term sickness. There is a risk that inactivity could further exacerbate labour supply issues, particularly in places where the working-age population is expected to decline.

What you will learn:

• In most UK regions there are more inactive individuals than there were before the pandemic in early 2020. The scale of this is significant in some parts of the country: in the East Midlands, the inactivity rate grew by almost four percentage points compared to before the pandemic.
• Long-term sickness is rising across the country, but other factors are important to the regional story. In Wales and the North East, the share of long-term sick individuals among the inactive population grew by close to 4 percentage points compared to pre-pandemic. But in Yorkshire & the Humber and the South West, it is retirement that has grown the fastest relative to the rest of the inactive population, and in Northern Ireland, the East of England, and London, it is students.
• We expect the demand for labour to fall in 2023, therefore alleviating some of the pressure on the labour market. However, demand for employment should pick up thereafter, and our forecast suggests that some regions—and especially Wales, the North East, and the South West—will face a decline in their working-age population, which coupled with growing levels of long-term sickness could exacerbate labour supply issues.