Bulletin: Labour supply and high energy bills

Labour supply issue

The ONS has reported  that the total number of people aged 18 to 24 years old who were not in education, employment or training (NEET) in April to June 2024 was 807,000, up 65,000 on the previous year.

There were an estimated 540,000 economically inactive young people aged 16 to 24 years who were NEET, up 75,000 on the year. In both age groups, young men were more likely to be NEET than young women and young men were also the major source of the increase recorded in the latest data.

IGD opinion

Comparable ONS data on the NEET population goes back to 2001. According to this data set, the scale of the NEET problem (in terms of numbers and proportion of young adults) was greatest in 2011. At that time, around 1.2m million 16–24-year-olds were NEET, or about 17% of the group.

So, on the face of it, the latest data does not seem too alarming, even though numbers seem to have crept up a little in recent years. However, closer examination of the data suggests that the nature of the NEET population has shifted.

At peak, in 2011, about 55% of NEETs were unemployed, with 45% inactive. In the latest data, 38% were unemployed, with 62% being inactive. This suggests that the primary issue is not a lack of jobs for young adults but some factor blocking participation in either work or education.

Several studies, including one from the Resolution Foundation, suggest that growing frequency of ill health, especially ill mental health, amongst young adults may be a key driver. If so, this will not be readily overcome.

Reducing skills shortages

Labour shortages and skills gaps are likely to put the UK food system under greater pressure.

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IGD opinion

In our latest Viewpoint report, we identified that one of the five key strategic priorities for the UK food system is to build a future-fit workforce. This will involve navigating short-term labour issues and long-term skills gaps. The latest statistics from the ONS about NEETS highlights the challenge ahead.

Labour supply, skills shortages and flatlining productivity are economic issues that have been recognised for some years. As the largest provider of jobs in the private sector, the food system can play a key role in addressing these.

Public finances concern

The latest data from the ONS shows that new public sector borrowing was £3.1bn in July 2024, up from £1.8bn in July 2023. This is the highest July borrowing since 2021, when the government was borrowing heavily due to the Covid pandemic.

Excluding the Bank of England, debt was 91.9% of GDP, 4.9 percentage points more than at the end of July 2023. This increase is due to the rising cost of public services and benefits.

IGD opinion

This news should come as no surprise. In our latest free Viewpoint report, we make it clear that high debt is one of the key challenges faced by the new Chancellor. The Chancellor is committed to manage government finances tightly and to ensure that new commitments are costed, but paying off debt will be a long, painful task, with no easy choices.

The Budget on 30th October should reveal how the government intends to rebuild public finances. This is likely to include reduced public spending and some tax increases.

Energy bills increase

The energy regulator Ofgem has announced that the energy price cap for October-December 2024 will increase by 10%. The new price cap will be £1,717 per annum (compared to £1,568). This is due to an increase in wholesale energy prices.

IGD opinion

Domestic energy (electricity and gas) price increases were the major driver of the powerful inflation spike endured by UK consumers over 2021-23, with the least well-off in particular being affected.

Retail energy prices peaked in summer and autumn 2022. They have fallen since then but have not returned to the levels seen before the war in Ukraine.

Even so, lower energy prices have played a key role in bringing inflation back down to normal levels.

However, the benefit of this has begun to dissipate in the last few months as historic changes have started to drop out of annual comparisons.

The inflation influence of domestic energy may begin to re-assert in the months ahead. Many households will be vulnerable to this – especially if winter 2024-25 proves to be a cold one.