Where have all the workers in Britain gone?  

New figures throw light on the missing million 

There are about 200,000 fewer EU nationals living in Britain, British government estimates show, which is severely hitting companies struggling to find the staff they need. 

The sheer number of people who have left the workforce in Britain since the pandemic struck is leaving companies struggling to find the staff they need.

Figures published on Tuesday show there are around half a million fewer people who are either in employment or actively looking for a job than at the start of 2020. 

The overall participation gap, — an estimate of the number of people who would have been available to work had the pandemic not happened — is closer to a million.

Challenge

For companies and the wider economy, the challenge is to get some of those workers back. 

Labour shortages in sectors from IT and computing to hotels and catering are forcing firms to ramp up wages. 

Many are responding by increasing prices, fueling a surge in inflation that is expected to prompt the Bank of England to increase interest rates early next year.

So where have all the workers gone? 

There are about 200,000 fewer EU nationals living in the country, British government estimates show. 

Meanwhile, over 375,000 more 16- to 64-year-olds are inactive — neither employed nor seeking work. 

Inactive

Inactivity hit almost 8.75 million in the three months through October, close to a record high. 

The increase in inactivity during the pandemic has been driven by young people, with the student population up by more than 200,000. 

There are also many more declaring themselves retired or long-term sick, with the latter reflecting the toll taken by the pandemic on the well-being of people in the UK.

In one encouraging sign, there are now fewer “discouraged workers,” people who are not looking for work because they believe that no jobs are available.

That suggests people are finding it easier to get work. 

The UK's Office for National Statistics data showed the number of people out of work for up to 12 months fell in the latest three months.

Impact

The pain appears to be more acute in Britain than the eurozone and the US, according to Bank of England officials, with the impact of Brexit colliding with the pandemic, figures last week suggested.  

Before the emergence of the Omicron variant, the Organisation for Cooperation and Development warned that a persistent shortage of workers in the UK could slow what is forecast to be the fastest growth rate among the Group of Seven major economies.

The threat of wage inflation, meanwhile, helps explain why the Bank of England is widely expected to raise interest rates before the US Federal Reserve. 

Much rides on whether companies can attract the newly “inactive” back to the workplace. 

If they return, wage pressures will abate. 

The Bank of England has said this dynamic will determine policy and the UK Treasury is closely following developments too.

— Bloomberg