A majority of businesses have reported an increase in people leaving the workforce, with 63 percent saying economic inactivity is directly affecting productivity and financial performance, according to a new study.
The research, by professional services network PwC, surveyed more than 300 businesses and over 4,000 UK adults. It found that mental health is the main factor behind rising economic inactivity, with seven in ten employers citing it as a key driver.
More than half of employers are reconsidering the support they provide in an effort to retain skilled employees. However, economic inactivity is expected to grow, as 10 percent of workers are actively considering leaving work for an extended period, while a further 20 percent have considered doing so in the past year. Among younger workers aged 18 to 24, this figure rises to 25 percent.
PwC Senior Partner Marco Amitrano said that economic inactivity is a very real issues for businesses.
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“As well as the cost to individuals, businesses are understandably concerned about the direct impact on productivity and financial performance,” he said. “Much of the current conversation focuses on how to get people outside the workforce back in, equally important is stemming the flow leaving the workforce in the first place.”
He added that 54 percent of employers are actively reconsidering further support measures to prevent economic inactivity and stressed the need for these efforts to be directed effectively.
Reasons for Economic Inactivity
The study found that 31 percent of economically inactive individuals had not anticipated becoming inactive. Of those who reached out to their employer before leaving, most had not made a final decision to leave at the time, with only 18 percent having done so. More than half – 58 percent – felt that their employer could have done more to support them.
Employers also reported being caught off guard, with 19 percent stating that they only became aware of a worker’s decision to leave when they handed in their notice.
Mental health and job dissatisfaction were cited as the main reasons for considering leaving the workforce, particularly among those under 35. The study found that individuals aged 18 to 25 were 1.4 times more likely to cite mental health concerns compared with older respondents.
However, the research also found that employers and employees had differing views on what support would help. While many employers pointed to benefits such as company car schemes, employees prioritised workplace culture and mental health support.
Barriers to Returning to Work
The research revealed that many economically inactive individuals are open to returning to work, with 43 percent expressing interest in either full-time or part-time employment, compared with 31 percent who were not interested. However, long-term mental health conditions (48%), long-term physical conditions (39%) and low self-esteem or confidence (37%) were the most commonly cited barriers to re-entering the workforce.
Despite this, more than half of employers – 57 percent – admitted concerns about recruiting someone who has been inactive. A further 37 percent associated inactivity with people “gaming the system.” Businesses identified skills and education gaps, expectations around flexible working and the need to accommodate mental and physical health conditions as some of the biggest challenges in hiring economically inactive individuals.
A Coordinated Approach
Katie Johnston, PwC’s local and devolved government leader, said there is the need for a coordinated approach to tackling the issue.
“If we are serious about reducing economic inactivity and contributing to the Government’s ambition of economic growth, then we need joined-up action not only helping people back into work, but more importantly stemming the flow of people out of work,” she said.
She added that addressing economic inactivity requires collaboration between central and local government, health and education providers and employers. Without a national, cross-government strategy, isolated policy initiatives are unlikely to deliver meaningful results.
