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Monday 05 December 2022 4:03 pm


AGEING POPULATION AND WEAKER POST-BREXIT MIGRATION HAS DAMAGED UK ECONOMY,
EXPERTS CLAIM

By: Jack Barnett

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Britain’s workforce is still 2.7 per cent smaller compared to pre-pandemic
levels, 60 per cent of which can be attributed to Covid-related factors (Photo
by Dan Mullan/Getty Images)

An ageing population, weaker migration inflows since Brexit and a sicker society
due to the pandemic has damaged the UK long-term economy’s health, top City
economists have warned.

A steadily rising elderly population has resulted in a jump in Brits leaving the
jobs market to take retirement or due to ill health, putting the workforce on a
downward trend, according to investment bank Goldman Sachs.

Read more

‘Government can change’ UK economic stagnation, CBI urges



“The share of the UK population aged 50 and above has increased meaningfully
over the past decade from 42 per cent in 2010 to 47 per cent in 2020 and is
projected to grow further going forward,” Goldman said in a note.



Weaker inflows of EU workers since the Brexit vote in 2016 has not been fully
offset by a rise in people from outside the bloc, constraining growth in the
UK’s working age population.

Figures from the Office for National Statistics last month revealed net
migration last year hit 504,000, the highest on record, although that number was
boosted by an influx of Ukrainian and Hong Kong refugees. 

Source: Goldman Sachs

International students flowed into the UK after being confined to their home
nations during the pandemic, providing a further boost to last year’s net
migration figures.

A jump in long term illness, primarily caused by people suffering from
long-Covid and struggling to receive routine care due to swelling NHS backlogs
amassed during the pandemic, has also reduced the number of available staff.

Britain’s workforce is still 2.7 per cent smaller compared to pre-pandemic
levels, 60 per cent of which can be attributed to Covid-related factors, Goldman
said.



However, “even without the pandemic, ageing and slowing population growth,
including due to lower migration, were likely to reduce labour force growth
meaningfully,” the note said.

A smaller workforce poses serious long-term problems for the UK economy. It
would cut the volume of goods and services the country is able to produce,
choking off GDP growth, likely resulting in sluggish real income improvements.

The Bank of England estimates the UK’s growth potential will be substantially
lower over the coming decade compared to previous years, driven by a smaller
workforce and anaemic productivity growth.

The Bank would likely have to keep interest rates to higher levels to cool
demand in response to weaker supply to stamp out high inflation, Goldman said.

Rate setters have most of this year argued businesses are hiking pay to outbid
rivals in the race for talent, which may force firms to raise prices, embedding
high inflation, already running at 11.1 per cent, a 41 year high, into the UK
for years.



Former member of the monetary policy committee and now senior economic adviser
to Oxford Economics Michael Saunders in a note last week said weaker potential
output growth was rightly identified by former prime minister Liz Truss, but her
“diagnosis was probably wrong, and her proposed ‘solutions’ threatened to make
matters worse”.

Truss tried to cut red tape and slash taxes, which Saunders argued “could make
it harder for the UK to increase trade openness, because a perception that the
UK is seeking to undercut other countries’ standards would probably limit scope
for deeper trade deals”.

Boosting public investment in infrastructure would expand the UK’s supply-side
potential, Saunders said. 

Chancellor Jeremy Hunt and Rishi Sunak in last month’s autumn statement slashed
government investment spending around 20 per cent in real terms.

Truss’s backers argue easing the tax burden on businesses would strengthen
investment incentives by allowing them to retain more profit, reducing the need
for the government to step up public spending.



Read more

UK recession to officially begin this winter, City economists predict




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SECTIONS

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