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

In keeping with the Workplace for Nationwide Statistics, GDP fell by 0.2% within the third quarter of the 12 months, the primary indicator of what the Financial institution of England predicts may very well be the longest sustained interval of damaging progress in a century, setting unemployment on target to almost double by 2025.

UK productiveness progress on the whole for the reason that 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 keeping with the Nationwide Institute of Financial and Social Analysis. Solely Russia – hit exhausting 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 components are at play,” stated The Telegraph: “inflation is sweeping throughout a lot of the world, Russia’s struggle has unleashed an power 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 practically half a century. But regardless of demand for employees, the variety of folks in work has didn’t get well to pre-Covid ranges, in contrast to 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 Large 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 actual reply might be present in a clunky-sounding measure referred to as ‘financial inactivity’: working-age individuals who aren’t working or searching for jobs”, stated the journal.

Virtually 9 million folks of working age are actually classed as “economically inactive” – that’s, neither in work, nor searching for work – an increase of greater than 600,000 for the reason that pandemic started.

This consists of a rise in early retirement and, crucially, a pointy soar 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 folks ready for NHS therapies is a poisonous one,” stated David Smith, financial editor at The Sunday Instances. “All of it provides as much as a labour market that’s extra dysfunctional than at any time in current historical past.”

Again within the 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 website added.

What subsequent?

Whereas “the starkest quantity contained within the newest employment figures is the document hole between pay rises within the non-public 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 primary challenges dealing with the economic system, as a result of it could maintain again financial progress whereas including to wage pressures that might make increased inflation last more. 

As a consequence, with “dwelling prices rising and fewer folks out there to work, employers have needed to supply increased pay to fill vacancies, although earnings have nonetheless not saved tempo with rising costs”, stated the Monetary Instances.

How precisely the gaps within the labour market might be crammed “stays a supply of debate”, stated The Spectator: “ought to full emphasis ought to be placed on getting British natives again into work, or do we want 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 seen,” agreed The New Statesman. Shadow work and pensions secretary Jon Ashworth has proposed a “reformed employment service” to offer specialist, tailor-made assist to over-50s.

“Reviving the UK’s flatlining economic system is not going to occur in a single day,” stated Politico. “Specialists communicate 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 website famous, “as Italy’s expertise demonstrates, it’s one factor to diagnose an sickness – one other to treatment it”.