UK’s sick workforce threatens growth as businesses push for health and skills reforms

A new report published today warns that long-term sickness is blighting the UK economy, with more than 300,000 people leaving the workforce each year because of ill health and about 2.8 million people economically inactive due to long-term sickness, roughly 7% of Britain’s workforce. The government’s own estimates put the minimum lost economic output from this inactivity at about £130 billion, not counting welfare payments or broader social costs. Experts say the scale reflects both health and skills challenges that have compounded in a tight labor market.

During meetings with business leaders, Shevaun Haviland, director general of the British Chambers of Commerce, says two topics crop up within five minutes: the inability to find workers with the needed skills and the churn of staff who fall out of work due to sickness. The BCC’s new analysis, Long Term Sickness Blighting UK Economy, underscores the stakes for employers across sectors, from manufacturing to services. Haviland notes private firms stand ready to do more to help workers stay healthy and return to work, but many face the costs and complexity of the current environment. "They can’t find the people with the skills they need, or are losing the ones they have through sickness," she said.

The report points to a mix of health and structural factors behind the UK’s relatively high sickness absence. Obesity, diabetes and other long-term illnesses are cited as apparent drivers, alongside systemic issues such as a complex apprenticeship levy and gaps in further education that hinder upskilling. For business leaders, the priority is reducing barriers to health coverage, easing the return-to-work process, and expanding access to mental health training—especially for SMEs that struggle to afford and navigate support schemes.

The British Chambers of Commerce lays out a suite of actions the government and employers could take. First, tax breaks for health services that employers provide to staff, paired with reforms to the fit-note system to streamline returns to work. Second, incentives for SME owners to access mental health training, recognizing the link between well-being and productivity. Finally, a wage-subsidy scheme aimed at helping young people with long-term health problems re-enter the workforce. The aim, the BCC argues, is to make it financially sensible for employers to offer comprehensive health cover and occupational health programs, which would in turn reduce sickness days and ease demand on the NHS while boosting the wellness sector and training pipelines.

At a broader policy level, the discussion intersects with the government’s ambitions for growth. Finance Secretary Rachel Reeves has framed the goal of making the UK the fastest-growing major economy in the G7, which many interpret as a desire to boost employment toward an 80% employment rate and bring roughly 1.5 million more people back into work. But the tone from business groups is that recent measures, including tax changes, may complicate hiring and training if not complemented by targeted incentives. Haviland suggests Reeves should invite business leaders to No. 11 Downing Street for discussion if serious about the aim of a more productive, healthier workforce.

Beyond policy debates, the market backdrop continues to show mixed signals. Saga, the cruise operator, reports it is back in profit as bookings from over-50s for next year are already secured, raising questions about whether older travelers are pulling forward plans in anticipation of tax or policy changes. By contrast, On the Beach reported a profit warning, noting that younger travelers are delaying bookings and sampling the market more cautiously. The dynamic underscores how demographics and policy shifts can tilt consumer confidence and travel demand.

The piece also touches on the broader financial services ecosystem that households use to manage savings and investment. It notes a cluster of DIY investing platforms that have grown alongside traditional brokers, including AJ Bell, Hargreaves Lansdown, Interactive Investor, InvestEngine, and Trading 212, which together illustrate how households are adapting to a more self-directed approach to wealth management. These platforms sit alongside policy considerations that influence consumer finance and employer-provided benefits as the economy seeks to rebound from the health-driven drag on productivity.

If health improves and workers can return to roles more readily, the productivity gains could bolster growth and contribute to renewed investment and hiring. But the path requires aligned incentives: more generous tax relief for health coverage, simpler rules around workplace health initiatives, and targeted support to help smaller firms invest in mental health training and wellness programs. As policymakers weigh the next steps, business leaders say the time is ripe for measured, practical steps that reduce sickness-related absences and help people stay healthy, trained, and in work.