UK labour market continues recovery but could be derailed by inflation and sickness

Responding to the Labour market overview July 2023 released by the Office for National Statistics, Ben Harrison, Director of the Work Foundation at Lancaster University, said:

“The UK labour market is continuing a post-pandemic recovery, but it risks being derailed by high rates of inflation and sickness.

“Growth in regular pay has hit 7.3% but sticky inflation means regular real pay still fell by 0.8% on the year. While high nominal pay growth should be good news, workers are facing the 18th consecutive pay drop on record. With the cost of a typical two-year fixed mortgage now close to the mini-Budget peak, and Government refusing to commit to meet public sector pay recommendations this year, millions of workers across the UK continue to face significant cost of living challenges.

“While vacancies have fallen for the 12th consecutive month to just over a million and inactivity continues to drop, long-term sickness is over 2.5 million as the UK continues to face worker shortages. Despite the Governor of the Bank of England recommending restraint on wage increases, this month's statistics suggest that employers must offer competitive terms and conditions to retain and recruit staff.

“To achieve its commitment to halve inflation, Government must accelerate efforts to reduce worker shortages by supporting the nearly one in four long-term sick who want to work into sustained employment. This should include strengthening job security, introducing a right to flexible working from day one, and improvements to support like Statutory Sick Pay, which is currently among the least generous offers in Europe.”