At the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, on August 23, Bank of England Governor Andrew Bailey highlighted that the UK is confronting a pressing issue stemming from sluggish underlying economic expansion and declining engagement in the workforce following the pandemic. He emphasized that demographic shifts, particularly an ageing population, combined with a notable reduction in employment among younger individuals due to health-related factors, are intensifying the urgency to improve productivity.
Bailey explained that while long-term unemployment trends are no longer the central focus for monetary authorities, attention has shifted toward understanding labour force participation rates. Official statistics indicate that only 79.0% of people aged 16 to 64 in the UK are currently employed or seeking employment — a figure that lags behind pre-pandemic levels and places the country near the bottom compared to other developed nations.
Although data limitations exist — such as low survey response rates and potential overrepresentation of inactive individuals in official reports — Bailey stressed that these issues do not fully account for the observed decline. He described the situation as deeply concerning, noting that without meaningful improvements, the nation’s growth potential will remain constrained.
The current Labour administration has committed to reversing this trend through policy initiatives aimed at increasing workforce involvement. However, earlier legislative resistance to reforming disability benefits has drawn criticism, with some experts arguing that existing structures may inadvertently discourage job-seeking behaviour.
Second-quarter 2025 data shows that 21.0% of working-age Britons are neither employed nor actively looking for work, down from a high of 22.2% the previous year but still above the 20.3% recorded before the pandemic. This persistent gap contributes to broader concerns within the Bank of England about inflation, which stood at 3.8% in July — the highest among G7 countries — and may take longer to converge toward the 2% target if supply-side constraints persist.
Bailey refrained from commenting on immediate monetary policy decisions during his panel discussion with European Central Bank President Christine Lagarde and Bank of Japan Governor Kazuo Ueda, focusing instead on structural economic challenges.
— news from Reuters
— News Original —
Bank of England’s Bailey says UK has ‘acute challenge’ over weak growth
JACKSON HOLE, Wyoming, Aug 23 (Reuters) – Britain faces an “acute challenge” over its weak underlying economic growth and reduced labour force participation since the COVID-19 pandemic, Bank of England Governor Andrew Bailey said on Saturday. n nSpeaking at an annual conference in Wyoming organised by the U.S. Federal Reserve, Bailey said an ageing population and an apparent illness-driven drop in working by younger Britons increased the need for efforts to boost economic productivity. n nSign up here. n n”Going back to this question about potential growth rates, that puts even more emphasis on raising productivity growth,” he said. “Ageing is not going to turn around in the foreseeable future.” n nBailey said the central bank had turned its focus away from long-term trends in unemployment to looking at levels of labour force participation instead. n nOfficial data shows that the percentage of 16-64 year olds active in Britain ‘s labour market is lower than before the COVID-19 pandemic, unlike in other advanced economies. n nBailey said there were big caveats around the data – including a low response rate and the possibility that the economically inactive might be more likely to take part in official surveys. n nBut he said he did not think this factor explained all the decline. n n”Data caveats aside, this is a pretty sad story for the UK because … we are well at the bottom of the league table,” he said. n nBritain ‘s Labour government has pledged to boost labour force participation and economic growth, but earlier this year its lawmakers rejected reforms to disability benefits which some analysts say discourage people from work. n nData for the second quarter of 2025 showed that 21.0% of Britons aged 16-64 are neither in work nor actively seeking a job, down from a peak of 22.2% last year but above a low of 20.3% before the pandemic. n nReduced labour force participation is one reason why some BoE policymakers fear that Britain ‘s inflation rate – the highest in the Group of Seven advanced economies at 3.8% in July – may be slow to return to its 2% target. n nBailey did not directly address the policy outlook in his remarks, made in a discussion about labour market challenges with European Central Bank President Christine Lagarde and Bank of Japan Governor Kazuo Ueda. n nReporting by Howard Schneider, writing by David Milliken; editing by Diane Craft