The UK is as soon as once more being labelled the “sick man of Europe” as wages proceed to lag properly behind the hovering price of residing and a dysfunctional labour market contributes to a looming recession.

In line with the Workplace for Nationwide Statistics, GDP fell by 0.2% within the third quarter of the yr, the primary indicator of what the Financial institution of England predicts may very well be the longest sustained interval of unfavorable progress in a century, setting unemployment on target to almost double by 2025.

UK productiveness progress normally because the 2008 monetary disaster has trailed that of comparable nations such because the US, France and Germany. Median incomes have additionally lagged behind neighbouring international locations over the identical interval, in response to the Nationwide Institute of Financial and Social Analysis. Solely Russia – hit onerous by crippling worldwide sanctions following its invasion of Ukraine – is forecast to have worse financial progress in 2023 than the UK among the many G20 nations.

What did the papers say?

“International elements are at play,” stated The Telegraph: “inflation is sweeping throughout a lot of the world, Russia’s warfare has unleashed an vitality disaster throughout Europe and rates of interest are hovering as a budget debt of the post-financial disaster years evaporates.

“But the UK has discovered itself on the forefront of the crunch,” stated the paper, which requested: “Why is Britain struggling greater than its friends?”

One main issue is the UK’s dysfunctional labour market. On the face of it unemployment, at present at 3.6%, is close to its lowest level for almost half a century. But regardless of demand for employees, the variety of individuals in work has didn’t get better to pre-Covid ranges, not like in each different G7 nation the place employment has risen in contrast with the tip of 2019.

The reply, stated The New Statesman, “goes past EU employees misplaced to Brexit, pandemic labour provide points, or the discredited Massive Stop idea – that we woke as much as our meaningless 9-5 lives throughout lockdown and determined to resign en masse”. Whereas these could have had some influence, “the true reply could be present in a clunky-sounding measure referred to as ‘financial inactivity’: working-age individuals who aren’t working or in search of jobs”, stated the journal.

Virtually 9 million individuals of working age at the moment are classed as “economically inactive” – that’s, neither in work, nor in search of work – an increase of greater than 600,000 because the pandemic started.

This consists of a rise in early retirement and, crucially, a pointy leap in long-term illness, which is “the driving issue for will increase in inactivity amongst older age teams”, reported The Well being Basis.

“The mixture of rising long-term illness and a backlog of seven million individuals ready for NHS therapies is a poisonous one,” stated David Smith, financial editor at The Sunday Occasions. “All of it provides as much as a labour market that’s extra dysfunctional than at any time in latest historical past.”

Again within the Nineteen Seventies, the then US secretary of state Henry Kissinger famously declared that economically “Britain is a tragedy”, stated Politico. Now “the UK is heading to be the sick man of Europe as soon as once more”, the information web site added.

What subsequent?

Whereas “the starkest quantity contained within the newest employment figures is the document hole between pay rises within the personal and public sectors”, that the dimensions of the potential workforce continues to shrink “stays most baffling to economists”, stated BBC enterprise editor Simon Jack.

Chancellor Jeremy Hunt made it clear over the weekend that he noticed the UK’s shrinking workforce as one of many principal challenges dealing with the financial system, as a result of it might maintain again financial progress whereas including to wage pressures that would make larger inflation last more. 

As a consequence, with “residing prices rising and fewer individuals out there to work, employers have needed to supply larger pay to fill vacancies, regardless that earnings have nonetheless not saved tempo with rising costs”, stated the Monetary Occasions.

How precisely the gaps within the labour market could be stuffed “stays a supply of debate”, stated The Spectator: “ought to full emphasis needs to be placed on getting British natives again into work, or do we’d like extra immigration?”

“One certainty is that Tory ministers are involved in regards to the labour scarcity – resulting in inner rows over loosening immigration – and Labour has observed,” agreed The New Statesman. Shadow work and pensions secretary Jon Ashworth has proposed a “reformed employment service” to provide specialist, tailor-made assist to over-50s.

“Reviving the UK’s flatlining financial system won’t occur in a single day,” stated Politico. “Consultants converse of an unbalanced mannequin closely reliant upon Britain’s providers sector and beset with low productiveness, a results of years of underinvestment and a versatile labour market which delivers low unemployment however typically insecure and low-paid work.”

However, the information web site famous, “as Italy’s expertise demonstrates, it’s one factor to diagnose an sickness – one other to treatment it”.