U.Ok.’s lacking staff and quiet quitters price the financial system about $400 billion

Since the pandemic, a growing number of working-age adults in Britain, aged 16 to 64 years, have chosen against employment. 

Among those who have kept their jobs, many have joined the legion of “quiet quitters” who tune in to work but only do the bare minimum. 

Both these groups are contributing to the U.K.’s dire productivity crisis, made worse since the 2008-09 global financial crisis. By comparison, the U.K.’s productivity is 16% lower than that of the U.S. and Germany, and continues to underperform most major OECD countries. 

Who are the ‘missing workers’?

When the pandemic kicked off in 2020, the U.K.’s workforce underwent a sea change. The country lost thousands of workers—who could otherwise seek employment—to long-term health problems, early retirements, mental health issues and an ever-increasing NHS waitlist.

Four years on, with COVID-19 in the rear-view mirror, that figure hasn’t bounced back. Instead, it hit staggering levels between February and April, with about 2.8 million, or 22.3%, workers in the country considered economically inactive, according to data from the Office of National Statistics released Tuesday. That marks a nine-year high in the number of people who are unemployed and not looking for work. 

Alarmingly, the crisis is driven by the younger entrants to the workforce—typically Gen Zers. 

For the economy, fewer active workers means a limited labor supply, just as the U.K. is trying to shake off a streak of sluggish growth and grapples with an aging economy. 

It could also prompt inflation, which has recently shown signs of abating, as companies try to retain workers by hiking wages. 

The Labour and Conservative political parties have both pledged to bring people back into the workforce given that it’s a £39 billion ($50 billion) drag on the economy. 

How do the quiet quitters figure into this?

The rise of remote work set off a trend of quiet quitting in the workplace, wherein employees quit going above and beyond for work. Workers lack motivation and aren’t as “actively engaged” as they might otherwise be. 

Turns out, the number of quiet quitters has ballooned to the point of costing the British economy £257 billion ($327 billion) last year, according to a Gallup report released Wednesday.

The scale of the problem is also reflected in how just one in 10 workers in the U.K. is categorized as “engaged” at work. It marks a sharp reversal from when the country led in the early 2010s with its highly engaged workforce. 

Employees are struggling with poor management and unclear goals, made worse by broader trends like Brexit and macroeconomic volatility, Gallup’s report found.  

The impact on productivity

Economic inactivity from missing workers hurts the U.K.’s GDP, while quiet quitters weigh on the U.K.’s economic output per hour of time. 

Productivity is a sensitive subject in the U.K. and has no simple answer. The rate has been declining for over a decade now, while rising in other countries like France and Germany, widening the gulf between Britain and its peers.

No one wants an economy that punches below its weight when it comes to productivity as it undermines economic resilience to big shocks.

A mix of underinvestment, unpaid overtime work and other policy gaps are among the factors making Britain underproductive. 

An important factor to look at in the productivity discussion is the gross value added, which measures the value of goods and services produced in any industry or sector of the economy, Ben Caswell, senior economist at the National Institute of Economic and Social Research said. 

“Fewer workers in work will naturally mean less output,” he told Fortune. “The breakdown of ONS data suggests that at the end of 2023, 71% of the growth in total inactivity since the pandemic can be attributed to ill-health. So it is definitely a concern for growth.” 

Given the productivity crisis looming large in the U.K., a burgeoning crowd of quiet quitters means yet another group in the economy that could contribute more at work but simply isn’t. In the case of missing workers, it was a question of health issues, while with quiet quitting, workers are giving up. So, if employees spend fewer hours working, that pulls down overall productivity.  

“If the ‘quiet quitting’ narrative holds, then recorded hours worked, remains constant, but workers perform fewer tasks in those recorded hours. So gross value-added falls but hours worked remain unchanged,” Caswell said. 

To be sure, the U.K. has had some wins in labor force-related metrics, such as a low unemployment rate and strong wage growth. London is also the biggest international talent magnet in the world. 

Still, productivity has snowballed into one of the country’s biggest economic hurdles, and the incoming government faces pressure to address it. 

“The next UK government will need to make tackling low productivity growth its top political and economic priority. This means putting it first in decisions on public spending, tax policy, regulation and international economic policy,” Creon Butler, director of the global economy and finance program at Chatham House, said in a May report.