UK faces ‘acute problem’ from weak development and shrinking workforce, says Andrew Bailey

[ad_1] Britain faces an “acute problem” from its weak underlying financial development and a drop within the variety of staff for the reason that pandemic, in keeping with the Financial institution of England governor, Andrew Bailey.

An increase within the variety of individuals outlined as long-term sick and an enormous drop in younger individuals in work – components that he prompt is likely to be intertwined – added to the squeeze created by an ageing inhabitants.

This elevated the necessity for efforts to spice up financial productiveness, Bailey instructed the gathering of main policymakers in Jackson Gap, Wyoming, on the weekend.

The emphasis wanted to be on elevating productiveness development, Bailey mentioned. “Ageing just isn't going to show round within the foreseeable future.” By 2040, 40 per cent of the UK inhabitants will likely be older than 64, he added.

He mentioned the Financial institution of England had turned its focus away from long-term developments in unemployment to look as a substitute at ranges of labour power participation.

Official information exhibits that the share of 16- 64-year-olds lively in Britain’s labour market is decrease than earlier than the Covid-19 pandemic, not like in different superior economies. Psychological well being was the commonest purpose for being inactive, a degree he described as “a really regarding growth”.

Bailey added that there have been caveats across the information, together with a low response fee and the chance that the economically inactive is likely to be extra probably to participate in official surveys.

However he didn't assume this issue defined all of the decline. “Information caveats apart, it is a fairly unhappy story for the UK as a result of … we're effectively on the backside of the league desk,” he mentioned.

The federal government has pledged to spice up labour power participation and financial development, however earlier this 12 months MPs rejected reforms to incapacity advantages, which some analysts say discourage individuals from work.

Information for the second quarter of 2025 confirmed that 21% of Britons aged 16-64 are neither in work nor actively searching for a job, down from a peak of twenty-two.2% final 12 months however above a low of 20.3% earlier than the pandemic.

Diminished labour power participation is one purpose why some Financial institution of England policymakers worry that Britain’s inflation fee – the best within the G7 at 3.8% in July – could also be gradual to return to its 2% goal.

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The newest official information confirmed the UK financial system grew at a quicker fee than anticipated within the second quarter, regardless of a slowdown from a powerful begin to the 12 months amid stress from tax will increase and Donald Trump’s international commerce battle.

The Workplace for Nationwide Statistics figures confirmed that development in gross home product slowed to 0.3% within the three months to the top of June, down from a fee of 0.7% within the first quarter.

Though it beat forecasts by Metropolis economists for a slowdown to 0.1%, the weak studying underscores the problem for the chancellor, Rachel Reeves, as she considers choices for enhancing the financial system and elevating revenues at her autumn finances.