14 Feb 2023

Record-high rate of ‘economically inactive’ working-age people in East Midlands, new figures show

The unemployment rate in the East Midlands declined slightly from 3.4% to 3.3% in the three months to December, remaining below the UK average of 3.7%, according to the Office for National Statistics’ latest regional labour market data published today (14 February).

However, the region’s economic inactivity rate – which measures the number of working-age people who have dropped out of the labour market for reasons such as retirement, caring duties, long-term ill health or studying – climbed to a record high of 22.7%, compared to a UK rate of 21.4%.

East Midlands Chamber chief executive Scott Knowles said: “After an upwards trajectory in the level of unemployment since the summer – albeit against a context of still being at historically low levels – it is good to see this curve begin to flatten in recent months.

“As we also saw with the UK economy narrowly heading off a widely-expected recession at the end of 2022, this is another important indicator in illustrating the resilience of our businesses during what has been a very challenging three years with pandemic restrictions followed by a cost-of-doing-business crisis.

“Yet we shouldn’t get complacent about a strong jobs market and our own research suggests unemployment levels may not remain so low this year.

“Our Quarterly Economic Survey for Q4 2022 found there was an 8% decline from quarter to quarter in the proportion of East Midlands businesses that added to their workforce in the previous three months, while there was a similar drop-off in recruitment prospects over the coming three months.”

The rising economic inactivity rate – which was 18.7% immediately before Covid-19 lockdown – poses a cause for concern and the Chamber has urged Chancellor Jeremy Hunt to address it in the forthcoming Spring Budget, scheduled for 15 March.

Scott added: “Not only are they continuing to face unsustainable cost pressures, but as the rising economic inactivity rate demonstrates, we have one of the tightest labour markets ever seen. Businesses that want to grow, and create jobs and wealth in their local areas, are unable to do so because of acute skills shortages.

“This poses a major concern for the road ahead as our economy plateaus but with the Spring Budget fast approaching, there are measures the Government can take to support businesses to develop a skills base fit for 21st century industry.

“In our Business Manifesto for Growth launched in Parliament last November, we proposed a series of reforms around how businesses invest in their people.

“These include flexible incentives for business investment in staff training, expanding the use of the apprenticeship levy, bringing forward the introduction of the lifelong loan entitlement to support retraining and the retainment of an older workforce, and a comprehensive reform of the shortage occupation list to allow sectors facing urgent demand for skills to get what they need.

“In other words, this is about ‘getting the basics right’ – removing the day-to-day barriers for businesses and ensuring the basic building blocks of economic success are in place.”

To read the Chamber’s Business Manifesto for Growth, A Centre of Trading Excellence, visit www.emc-dnl.co.uk/manifesto