Government report warns of growing health-related economic inactivity

The Government has published its final Keep Britain Working report, warning that the United Kingdom faces a continuing rise in economic inactivity linked to ill health, disability and long-term sickness. The report, issued by the Department for Work and Pensions and the Department for Business and Trade, sets out evidence that more people are leaving the workforce because of health conditions, reducing productivity and increasing costs for employers and the state.

The review was commissioned in 2023 to examine why record numbers of working-age people have stopped working or looking for work. The final report says that more than one in five working-age adults are now economically inactive, with the number who are not working because of ill health reaching 2.8 million, an increase of around 800,000 since before the pandemic. It estimates that without intervention a further 600,000 people could leave work by 2030 for health-related reasons.

The report describes the trend as a threat to national prosperity and individual wellbeing. It states that the cost of economic inactivity linked to poor health now stands at £212 billion a year, equivalent to about seven per cent of GDP. That figure includes lost productivity, welfare payments and reduced tax receipts. For employers, sickness absence is at its highest level for 15 years and costs businesses an estimated £120 per day in lost profit for every absence day. The report adds that a 22-year-old leaving work because of ill health could be more than £1 million worse off over a lifetime than a peer who remains in employment.

According to the report, the UK now has a higher rate of economic inactivity than many comparable economies, including the Netherlands and Denmark. It attributes this to long-term conditions, musculoskeletal disorders and mental health problems, alongside a system of workplace and welfare support that it describes as fragmented and reactive.

Barriers to improvement

The review identifies three major barriers to improvement. The first is what it calls a culture of fear in the workplace, where employees are reluctant to discuss health conditions and line managers are uncertain about their responsibilities. The second is a lack of consistent or accessible occupational health provision, particularly among small and medium-sized enterprises. The third is the continuing disadvantage faced by disabled people, who are more likely to be self-employed, unemployed or economically inactive than those without disabilities.

The report says that addressing these issues will require a change in how work, health and disability are managed across the economy. It proposes a new framework called the Healthy Working Lifecycle, which sets out five stages of working life: recruitment and onboarding, healthy in work, unwell in work, absence and return, and exit and re-employment. Each stage is intended to provide specific support to help people enter, remain in or return to work.

The report argues that most employers already invest substantial amounts in health and wellbeing initiatives, but that spending is often poorly targeted. It says that better coordination and evidence-based intervention could deliver large productivity and welfare gains without significant additional expenditure.

To achieve this, the review recommends three main actions. The first is to establish the Healthy Working Lifecycle as a recognised national framework, supported by voluntary certification and guidance. The second is to expand workplace health provision through a system of case management, stay-in-work plans and early intervention. The third is to create a new Workplace Health Intelligence Unit to collect data, evaluate programmes and guide incentives such as tax benefits, procurement conditions or regulatory changes.

The report proposes a phased rollout of the reforms over seven years. A vanguard phase would begin in the first three years with a group of willing employers testing the approach, followed by an expansion phase and a period of general adoption. It also calls for new funding models that could allow small employers to pool resources to access occupational health services.

The review notes that only 30 per cent of small and medium-sized employers currently offer any form of occupational health support, compared with 86 per cent of larger firms. It cites evidence showing that early intervention significantly increases the likelihood of returning to work, and that prolonged absence sharply reduces it.

The report suggests that for employees who are off work for more than a year, the probability of returning to employment falls below 50 per cent. It also refers to studies showing that workplace health interventions can deliver a return on investment of between £4.70 and £8 for every £1 spent.

In addition to employer action, the review calls for government reform of the fit note system, better alignment between the NHS and employment support services, and stronger incentives for employers to adopt good practice. It recommends that the Government act as an enabler rather than a direct provider, focusing on coordination across departments and removing disincentives to work in the welfare and benefits system.

Work is a good thing (on the whole)

The report argues that remaining in work is generally beneficial for health and wellbeing, provided the work is good quality and suitably managed. It says that long-term absence or economic inactivity often leads to deteriorating mental and physical health and lower life satisfaction.

It also states that the negative wellbeing impact of losing work is greater than that of many major life events, including bereavement. The review warns that failing to act will deepen regional inequalities and place further pressure on public services.

While the report presents a detailed framework for reform, it also highlights a number of risks. It notes that data on health and work are inconsistent and that many existing programmes, such as Access to Work, lack robust evaluation. It warns that voluntary adoption of new standards could create a two-tier system in which some employers offer comprehensive support while others do not.

The review estimates that the cost of workplace health provision would initially be between £5 and £15 per employee per month, depending on the level of service. It acknowledges that smaller employers may need additional assistance to meet these costs and suggests shared funding or external support as possible solutions.

The report says that successful implementation will require coordinated effort across government departments and devolved administrations. It calls for strong political leadership and clear accountability to ensure that policies and funding remain aligned over time.

It also recognises that cultural change will take longer than procedural reform. The review concludes that progress will depend on building trust between employers, employees and healthcare providers, and on making early intervention a normal part of working life.

The Keep Britain Working report forms part of a wider government effort to reduce inactivity and raise productivity. It follows earlier initiatives on disability employment and occupational health announced in the Spring Budget and in the 2024 Back to Work Plan.

The Government has not yet confirmed which recommendations it will adopt or the timetable for implementation. Officials said a formal response will be published in due course. The report’s authors state that the UK’s long-term economic health will depend on improving participation and supporting people to stay in work for longer. They conclude that keeping people in good work is both a moral and an economic imperative, and that failing to act will carry increasing costs for individuals, employers and the public purse.

The full Keep Britain Working: Final Report is available on the Government website.