UK economy suffers as government lacks long-term growth strategy

The UK economy will suffer from the government’s “chop and change” strategy for delivering long-term growth, an influential cross-party group of MPs has said.

The House of Commons treasury select committee has told the government, after months of gathering evidence for its inquiry into jobs, growth and productivity after coronavirus, that it lacks a long-term strategy for the economy and this should be a priority for the new chancellor, Nadhim Zahawi.

The government must allocate more funding to support those suffering from long covid to help as many as possible return to the workforce, according to the committee.

The number of vacancies, which has hit a record of 1.3 million, is higher than the number of unemployed people in the economy after hundreds of thousands of workers left their jobs. The exodus from the workforce since the pandemic was mainly driven by workers aged 55-64 who retired early or had to leave due to long term illnesses including mental health conditions and long covid.

The shortage is putting pressure on industries to meet high levels of demand with fewer workers. The committee said the government should prioritise addressing skills gaps to ease labour shortages because the current level of vacancies could hold back growth and stoke inflation if firms try to attract workers with higher wage offers.

The MPs concluded that a large part of the country’s slow productivity growth is due to a “long tail” of less productive firms, many of whom are small businesses, who are struggling to adopt new technologies and lack managerial skills.

Mel Stride, a Conservative MP and chair of the committee, said that Zahawi and the incoming prime minister, who will be decided following the conclusion of the Tory leadership election in early September, should get a grip on productivity and stimulating business investment as a way to create economic growth.

“The evidence that we received suggests there needs to be greater stability and long-term certainty in government policy making,” he said. “It’s also imperative that the government takes action to help the large number of people suffering from long-covid, many of whom are likely to wish to return to work. Prioritising investment in this area is likely to have a tangible benefit on the UK’s tight labour market, which will help in the fight against inflation.”