Britain is running out of workers. The UK population may be growing, but the share of that population that is economically active is falling. More than 9.2 million working-age adults are out of the labour market today, and the number is growing.

This might be the biggest story in today’s Budget, and certainly one that deserves more attention from politicians and businesses alike.

The Office for Budget Responsibilty’s fiscal analysis accompanying the Budget contains some pretty bleak data and projections on economic inactivity and participation the workforce.

In headline terms, the OBR has abandoned its previous optimism that the spike in economic inactivity that followed the pandemic would be temporary. Based on data showing that inactivity rates remain stubbornly high, the forecasters now expect the participation rate to go on falling from its pre-pandemic peak of 64.3 per cent to 62.8 per cent by 2028.

Why? Why are fewer British residents making themselves available for work? The biggest single drag on participation visible in the OBR forecasts is poor health. About a third of the inactive population is out of the labour market because of sickness, either physical or mental.  In all, 2.8 million people in the UK can’t work because of sickness, a number that rose by 200,00 over last year.

As the OBR notes, that rise tallies with a sharp rise in people in receipt of incapacity benefit.  Around 3.1 million people now get IB, up from 2.5 million before the pandemic.

The slow tilting of the UK population towards a smaller active workforce and a larger inactive group is a huge story. It helps to explain why GDP per capita – increasingly the favoured measure of economic performance – isn’t growing, and why the country sometimes just feels stagnant and grim.

It’s also going to be a headache for business, if they’re not already suffering its effects: it’s going to get even harder to find, hire and keep workers as the pool from which they can be recruited continues to shrink.

In the past, immigration helped to offset the effect of a sicker, less active population: companies could import people to fill jobs they couldn’t fill with UK residents.

Notably though, immigration is doing a bit less now than in the past to offset the impact of a sicker, less active population. Once, immigrants were much more likely than the general population to work. But the post-Brexit shift away from EU nationals towards people from other parts of the world has been accompanied by a change in the reasons for immigration: more migrants are here to study at UK universities, and fewer of them work. (Though their participation rate is from 30 per cent in 2019 to 48 per cent in 2023, probably because it’s now easier for international students to get a job here after graduating.)

And the politics of migration mean it’s unlikely that any future Labour government will seek to change things dramatically here – the safety-first Starmer approach to policy suggests that a big move on immigration is unlikely to come early in the next parliament, even if the Labour coalition was fully in favour of such a thing.

So the British economy is likely to continue to go short of active working-age adults, at least until we see significant policy interventions to arrest the decline in economic participation. A lot of the ideas advanced in this area focus on welfare reform: expect to see more Tories, and a few Labour people, pondering whether welfare is too generous and encourages people to sign off sick rather than work.

But I’d suggest that health services should be a bigger part of the conversation. NHS waiting lists and deeply inadequate mental health services are surely a major driver of that growing sick list, along with wider public health issues including obesity. Fixing the NHS, and properly supporting mental health and raising overall population health should all therefore be seen as economic as much as social priorities. Put simply, a sick population means a sick economy.

And businesses who want to recruit and retain – as well as playing their full part in the life of the nation – should be giving more thought to what they can do to increase the health of the UK population. Speaking out on health as an economic issue would be a good start.