17 April 2024 – The UK unemployment rate has been at its highest in six months, according to the latest Office for National Statistics report.
The current figure comes in the wake of the diminishing number of vacancies in the market, a tell-tale sign of a cooling labour market.
The UK labour market in numbers
For the latest quarter, the UK unemployment rate was 4.2%, an increase from 4.0% for November through January. The current figure is also at its highest since the summer of the previous year.
The redundancy rate, or the rate at which companies reduce their workforce, increased to 3.9 per thousand employees in the months leading up to February. That is up by 0.6 per thousand employees compared to the previous quarter.
Economic inactivity—individuals not employed and not looking for employment—has also steadily risen to 22.2%, primarily driven by those aged 16 to 34. However, this figure is partially offset by those who returned to the workforce aged 35 to 49.
Interestingly, COVID-19 continues to influence the labour market. The ONS reveals that long-term sickness is becoming one of the determining factors in economic inactivity. Although it is more prevalent in those aged 50-64, it has consistently become more common in all age groups.
Another factor affecting economic inactivity is students returning to school.
The number of vacancies fell 13,000 from the previous quarter to 916,000. In contrast to the same period last year, total vacancies decreased by 204,000.
The HM Revenue and Customs also revealed that the number of workers on payrolls decreased by 67,000 to 30.3 million in March.
It is important to note that the data came after the UK fell into a recession in the latter months of 2023.
Why are Brits not working?
The current UK unemployment rate may indicate inflation’s loosening hold on the labour market. As inflation rates drop and wage increases remain high, employees should start to feel the difference.
However, significant events in the past months made the general public feel otherwise.
For example, the government’s attempt at negotiating with NHS unions and delays in reducing waiting lists come to mind.
In February 2024, an estimated 106,000 working days were lost because of labour disputes across the UK. The health and social work industry suffered the most losses.
The reasons for economic inactivity also revealed that employees had to delay employment due to long-term sickness. Furthermore, another reason cited by the ONS report for this inactivity is due to people looking after the family or home.
Rising costs for childcare and later living care have forced many Brits to take on the responsibility themselves. As a result, they have no choice but to accept less paid hours if they don’t forgo working entirely.
Record levels of people are off work due to long-term sickness, many struggling to access the healthcare they need. It shows this Conservative government’s neglect of the NHS is damaging the country’s economic recovery.
Sarah Olney, Liberal Democrat Treasury spokesperson
Another is the period of weak economic activity that resulted in a mini-recession in the latter half of 2023.
Small businesses faced a worsening labour and skills crisis by paring down an already barebone workforce. Unfortunately, this only contributed further to the UK unemployment rate.
Although the economy is projected to recover, economists say growth expectations should be tempered.
Our Opinion
The current economic landscape isn’t favouring small UK businesses. This month staffing costs for many SMEs have gone up, as the National Living Wage has risen.
Recent changes to corporation tax mean that many small businesses now pay more tax, if they earn more than £50,000 a year. This can have an impact on the healthiest business.
But many of our small businesses have struggled for years now. For the companies the pandemic hasn’t been too much, it has at least weakened them financially. The high running costs that followed and the spike in energy bills has made many fight for survival.
Customers have had to reign in their spending to mitigate the effects of the cost-of-living crisis, which is only slowly starting to ease.
Given this backdrop, it’s no wonder many businesses had to slam the breaks on recruitment. The economic outlook is after all less than rosy.
Especially, because even if businesses could hire staff, many struggle to find talent with the right skills. At the moment, the UK doesn’t feel like a good place to run a small business.
We here at Business4Beginners are in the same boat. So what are small businesses to do? Well, fight on. The only thing they can do. And hope that the next UK government will listen to our plight and give the small business community the support the need and deserve.
