By Suban Abdulla
LONDON (Reuters) - Britain's long-term illness problem is worse than previously thought, aggravating the shortage of workers, adding to risks of higher inflation and making it harder for the government to speed up the slow economy.
Official data showed on Tuesday that an estimated 2.8 million people aged 16-64 were neither working nor seeking work due to long-term sickness during the three months to December.
This equates to 6.6% of the working-age population. That would represent the highest ratio on record although comparisons are hindered by changes in the way the Office for National Statistics produces its figures.
"The number of long-term sick is continuing to increase, suggesting this is a more stubborn issue," economists at Nomura bank said.
The problem is a worry for the Bank of England. Governor Andrew Bailey and colleagues have expressed concern about the level of worker inactivity as they assess inflation risks.
Tuesday's data showed regular wages grew at the slowest pace in over a year. But at 6.2% it remains too high to allow the BoE to move quickly towards cutting interest rates, even with the economy expected to have gone into recession late last year.
Prime Minister Rishi Sunak, facing a national election expected later in 2024, has pledged billions of pounds to tackle the rising levels of inactivity among working-age people.
Analysts linked Tuesday's high figures to the after-effects of the COVID pandemic and long waiting times in the National Health Service (NHS).
"(BoE) policy makers will be particularly concerned about long-term sickness rising to a record 2.8 million – a trend that, unless addressed, will put a brake on Britain’s jobs recovery, put pressure on the public finances and NHS," economists at the Resolution Foundation think tank said.
After long-term sickness, being a student and looking after loved ones were the most common reasons for inactivity in the workplace between October and December.
In July, the ONS said long-term sickness was driven by people citing "depression, bad nerves and anxiety" and those suffering with other health conditions, which included COVID.
Worsening long-term sickness has added around 16 billion pounds ($20 billion) in annual borrowing by the government, according to Britain's official budget forecasters.
In the current financial year, the government is expected to borrow about 124 billion pounds in total.
Tony Wilson, director of the Institute for Employment Studies, said the situation threatened to aggravate inequalities between lower and higher-income households, at a time when many employers are crying out for staff.
"This rise in worklessness has happened despite still over 900,000 vacancies in the economy and rising salaries," Wilson said.
"Weaknesses in our labour market will continue to hold back economic growth and widen social and economic inequalities."
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(Reporting by Suban Abdulla; Editing by William Schomberg and Alison Williams)