Business deeply concerned about economic inactivity but wary of recruiting the inactive

• Nine in ten (90%) employers are concerned about inactivity, with six in ten seeing an increase in employees leaving the workplace and more than half reconsidering the support they provide staff

• Four fifths (81%) of employers say productivity has been impacted by economic inactivity, with more than seven in ten (77%) saying it is affecting financial performance

• Over half (57%) businesses are worried about recruiting someone who has been inactive; over a third of employers associate inactivity with people “gaming the system”, but a similar proportion see it as a risk to talent they value

• Meanwhile, one in ten workers are actively considering leaving work, with mental health the key reason cited.

The majority (63%) of businesses have seen an increase in people leaving the workplace and becoming inactive, and say this is directly impacting productivity and financial performance. Mental health is the key driver, according to seven in ten businesses, with more than half of employers reconsidering the support they provide to stop talented people from leaving.  

These findings come from a major PwC study published today exploring business’ perspective on economic inactivity, contrasted with the views of individuals. PwC, alongside FocalData, heard from more than 300 businesses and more than 4,000 UK adults through interviews and surveys.  

The research suggests economic inactivity will continue to grow, with 10% of workers actively considering leaving work for an extended period. A further 20% have considered leaving in the past year (spiking to 25% for 18-24 year olds), with concerns about mental health the most cited factor.  

Marco Amitrano, Senior Partner of PwC UK, comments: 

“Economic inactivity is a very real problem for people and businesses. As well as the cost to individuals, businesses are understandably concerned about the direct impact on productivity and financial performance. Much of the current conversation focuses on how to get people outside the workforce back in, equally important is stemming the flow leaving the workforce in the first place. Our research shows the path from work to inactivity is not set in stone. With 54% of employers actively reconsidering further support to prevent inactivity, it’s vital this support is channelled in the most effective way. Guardrails to prevent inactivity need to be part of the framework for UK growth.”

Inactivity not a foregone conclusion

Amongst the economically inactive, 31% said they did not anticipate becoming inactive. Of those who reached out to their employer, most respondents had not yet made a final decision to leave work (only 18% had). Crucially 58% said their employer could have done something more to help them. A significant number reached out to no-one at all.  

Employers corroborate this picture - the first time a significant proportion (19%) realised someone was going to leave was when the person handed in their notice.  

For people currently considering leaving work for an extended period, the key reasons are ‘mental health’ and ‘unfulfilling work’ - with mental health being the most important of the two for people under the age of 35. Indeed people aged 18-25 are 1.4 times more likely to cite concerns with mental health compared with older respondents.

However, the research points to a mismatch between what employers think would help and what individuals say they need. Many employers highlighted benefits such as company car schemes rather than culture or health support.  

Barriers to returning to work  

A large proportion of economically inactive people said they were interested in returning to work full or part-time (43%, versus 31% who said they were not interested). The most frequently cited barriers are a long-term mental health condition (48%), long-term physical condition (39%) and low self-esteem and confidence (37%).   

Over half of employers (57%) admit to being worried about recruiting someone who has been inactive, with more than a third (37%) associating inactivity with people “gaming the system”. However, businesses believe amongst the biggest barriers to people returning to work are skills and education gaps, alongside expectations around flexibility and the business’ ability to accommodate mental and physical health needs.

Katie Johnston, local and devolved government leader, at PwC, said:

“Our research into the systemic issue of people leaving the workforce and being unable to return to work pulls no punches in setting out the scale of the challenges facing individuals, government and businesses. 

“If we are serious about reducing economic inactivity and contributing to the Government’s ambition of economic growth, then we need joined-up action not only helping people back into work, but more importantly stemming the flow of people out of the work. This is not an issue for government alone, it needs close collaboration between central and local government, health and education providers and employers. Isolated, unconnected policy initiatives and interventions are unlikely to deliver significant benefits. Given the multi-faceted and whole-system nature of the challenge, we need action on multiple fronts within an overarching national, cross-government strategy for raising labour market participation.”

-Ends-

Notes to editors

About the report

To request a full copy of the report please contact Lucy.Buckham@pwc.com or Laetitia.Lynn@pwc.com

The ‘Turning the Tide on Economic Inactivity’ report draws on interviews (phase 1) and extensive surveys (phase 2) with businesses and individuals. All the research was conducted in January 2025.  

Phase 1 comprised 300 interviews via FocalData. These were predominantly with working and inactive adults, with particular representation among 18-24 and 24-35 year olds. Phase 1 also included interviews with 50 businesses. 

Phase 2 involved:

1) a PwC survey of 300 businesses (including 100 SMEs), with respondents predominantly HR Directors and other C-Suite roles

2) a survey of 4,404 adults (18-64) led by Focal Data, with additional boosts among the 18-24 unemployed population and long-term sick.