Investment in health boosts labour productivity and economic activity

Every pound invested in the NHS results in around £4 back to the economy, new analysis shows investment in health boosts economic activity

16 October 2022

Investment in the NHS should be at the heart of the Government’s economic growth agenda, with new independent analysis revealing that even small reductions in the percentage of people unable to work due to being stuck on waiting lists or experiencing long-term sickness can deliver thousands of workers back into the labour market.

Over 200,000 people have left the labour market since the pandemic because of ill health, with a record high 2.5 million people who are now inactive due to long term sickness. A fifth of adults aged 50 – 65 years old who have left work are currently on an NHS waiting list for medical treatment.

New independent analysis commissioned by the NHS Confederation and conducted by Carnall Farrar reveals how a one per cent decrease in the proportion of workers off due to long-term sickness – a recognised proxy for general morbidity – is associated with an additional 180,000 workers joining the UK’s working population.

The analysis reveals that for every pound of public money invested in the NHS, £4 is recouped through gains in productivity and increased participation in the labour market. The analysis shows, for the first time, the direct correlation between an increase in investment in the NHS and the impact this can have on growing the country’s economy.

The analysis shows that further investment in the NHS will mean that A&E attendances, as well as people reporting long-term sickness – both of which are associated with an increase in the employment rate – will decrease. This is especially the case in areas of high deprivation which have higher unemployment rates.

As one of the largest employers across the country, the NHS often provides the main source of employment in many towns and cities. But the NHS’ contribution to the economy could be even higher if it were funded to fill the 132,000 vacancies it is carrying. This would enable the NHS to provide more health care that would help reduce waiting lists and long-term sickness and, in turn, return more people to the labour market.

Where there are acute labour shortages in particular areas of the country, it is often the health and care sector that finds it the hardest to recruit, leading to a vicious cycle of over stretched services with even more people unable to work due to being long-term sick.

The analysis highlights how the economic value of ensuring the NHS has enough funding to help keep local communities as healthy as possible goes above and beyond the range of services people receive in being able to access healthcare and sets out how the NHS is an ‘investable proposition’.

The latest figures from the Office for National Statistics shows that the economic inactivity rate – which measures the proportion of people aged between 16 and 64 not looking for work – increased to 21.7% in the period June to August. The number of those inactive because they are long-term sick is now nearly 2.5 million, its highest level.

 Commenting on the findings, Matthew Taylor, chief executive of the NHS Confederation said:

“The government’s priority is economic growth but that won’t be achieved unless it finds a way of boosting the numbers of people available to work.

“Over 200,000 people have left the labour market since the pandemic because of ill health, with a record high 2.5 million people who are now inactive due to long term sickness. The independent analysis we have commissioned shows that reducing the number of people not in work due to ill-health, bringing them back into the labour market, and growing investment in the NHS has a clear relationship with economic growth. This means that spending on the NHS should be regarded as an investment, not a cost.  

“This will require investment in the NHS to reduce the number of people languishing on waiting lists or experiencing other conditions that mean they can’t work. This analysis therefore debunks the myth that the NHS is a drain on public resources - in fact, it’s a key driver of labour productivity and wider economic activity. And as one of the largest employers across the country, the NHS often not only provides the main source of employment in many areas, but it also acts as a lifeline for local businesses.

“We encourage the new Chancellor to ensure investment in the NHS is not forgotten in his first fiscal announcement.  As this analysis shows, a pound invested in health results in £4 back in wider economic activity. That’s why we believe the NHS should be considered an essential building block of any national and local plan for growth.

 “This would give a significant boost to the UK economy at a time of ongoing challenges in labour market participation, widespread labour and skills shortages and set against a backdrop of the increasing cost of living.”