Economy &
Infrastructure
Wales
Latest Edition: Wales’ Economic Outlook in 2025
An increase in the number of people leaving the workplace and becoming inactive is impacting productivity and financial performance, according to new research.
The study from PwC finds that mental health is the key driver, according to seven in ten businesses. More than half of employers are reconsidering the support they provide to stop talented people from leaving.
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.
Stuart Couch, Market Senior Partner for PwC in Wales, said:
“Productivity is one of the most significant challenges facing the Welsh economy today. Our output per hour is the lowest in the UK, 17.3% below the average. As productivity growth directly leads to economic growth, it’s also one of the best indicators of future prosperity.
“Our research recognises that economic inactivity represents underutilised capacity in our economy. If the Welsh public sector and business ecosystem can better support people who want to work, but who are unable to due to physical and mental health issues, caring commitments or a lack of qualifications, we all stand to benefit from the long-term economic growth associated with a bigger and healthier workforce.
“Given the significant structural changes as South Wales transitions to a greener economy and away from its heavy manufacturing roots, transition boards and investment bodies will have a key role to play in addressing some of the challenges leading to economic inactivity by helping people achieve relevant skills and qualifications, in turn building self-esteem.”
Marco Amitrano, Senior Partner of PwC UK, said:
“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, but 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.”
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.
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 UK 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.”
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