UK is worst performer in G7 for workforce participation since Covid

Britain has emerged as the worst-performing country in the G7 for workforce participation since the Covid pandemic, after an exodus of half a million people amid record levels of long-term sickness.

Figures from the Organisation for Economic Co-operation and Development (OECD) show the UK’s labour force participation – the percentage of working-age adults either in work or job hunting – was 78.6% in the final three months of 2022, down from 79.5% in the same period at the end of 2019.

Trailing almost every other advanced economy in the world, Britain ranked bottom of the G7 for workforce participation, alongside only seven other countries in the 38-member OECD where labour market participation is still below pre-Covid levels.

The figures show a smaller 0.3 percentage point decline in participation in the US to a rate of 74.1%. Chile, Colombia, Costa Rica, Latvia, Lithuania and Switzerland also recorded declines.

It comes as employers across the UK struggle to fill near-record vacancies amid a dramatic rise in economic inactivity – when working-age adults are neither in a job or looking for one – since the start of the pandemic.

Official figures show about half a million more people are inactive compared with February 2020. That increase has been driven by older workers leaving the job market and long-term sickness, with a rise in the number of people out of work due to ill health to more than 2.5 million.

Some economists, including the former Bank of England chief economist Andy Haldane, have warned that record NHS waiting lists and years of underinvestment in health and social care could be playing a contributing role. Andrew Bailey, the Bank’s governor, has warned that failure to boost participation risks adding to inflationary pressures as companies push up wages to attract and retain staff.

The chancellor, Jeremy Hunt, made increasing workforce participation one of the central themes of last month’s budget, announcing tax cuts on pensions pots and funding for childcare to encourage more people to engage in the jobs market.

In stark contrast to the UK, labour force participation across the OECD hit the highest levels on record dating back to 2008, with the average level climbing to 73.3%.

France and Germany recorded an increase of more than a percentage point, while Italy’s rate increased by 0.4 points and Japan’s by 0.7 points.