Tech Trends

Firms report negative impact on productivity from staff leaving the workforce shows PwC research

2025-09-05 14:31:17

The majority (63%) of businesses have identified a negative impact on productivity and financial performance from an increase in people leaving the workplace and becoming inactive. New research from professional advisory firm PwC, shows that mental health (70%) is the key driver, with more than half of employers reconsidering the support they provide to stop talented people from leaving. The research, which PwC conducted with FocalData, also suggests economic inactivity will continue to grow, with 10% of workers actively considering leaving work for an extended period. A further 20% have considered leaving in the past year (spiking to 25% for 18-24 year olds), with concerns about mental health the most cited factor. Latest figures from the ONS shows that Wales has 503,000 of working age adults (26%) who are economically inactive and not seeking employment. Stuart Couch, market senior partner for PwC in Wales, said “Productivity is one of the most significant challenges facing the Welsh economy today; our output per hour is the lowest in the UK, 17.3% below the average. As productivity growth directly leads to economic growth, it’s also one of the best indicators of future prosperity. “Our research recognises that economic inactivity represents underutilised capacity in our economy. If the Welsh public sector and business ecosystem can better support people who want to work, but who are unable to due to physical and mental health issues, caring commitments or a lack of qualifications, we all stand to benefit from the long-term economic growth associated with a bigger and healthier workforce. “Given the significant structural changes as South Wales transitions to a greener economy and away from its heavy manufacturing roots, transition boards and investment bodies will have a key role to play in addressing some of the challenges leading to economic inactivity by helping people achieve relevant skills and qualifications, in turn building self-esteem.” The research also shows that amongst the economically inactive, 31% said they did not anticipate becoming inactive. Of those who reached out to their employer, most respondents had not yet made a final decision to leave work (only 18% had). Crucially 58% said their employer could have done something more to help them. A significant number reached out to no-one at all. The first time a significant proportion (19%) of firm realised someone was going to leave was when the person handed in their notice. For people currently considering leaving work for an extended period, the key reasons are ‘mental health’ and ‘unfulfilling work’ - with mental health being the most important of the two for people under the age of 35. Indeed people aged 18-25 are 1.4 times more likely to cite concerns with mental health compared with older respondents. However, the research points to a mismatch between what employers think would help and what individuals say they need. Many employers highlighted benefits such as company car schemes rather than culture or health support. A large proportion of economically inactive people said they were interested in returning to work full or part-time (43%, versus 31% who said they were not interested). The most frequently cited barriers are a long-term mental health condition (48%), long-term physical condition (39%) and low self-esteem and confidence (37%). Over half of employers (57%) admit to being worried about recruiting someone who has been inactive, with more than a third (37%) associating inactivity with people “gaming the system”. However, businesses believe amongst the biggest barriers to people returning to work are skills and education gaps, alongside expectations around flexibility and the business’ ability to accommodate mental and physical health needs. Katie Johnston, local and devolved government leader, at PwC, said: “Our research into the systemic issue of people leaving the workforce and being unable to return to work pulls no punches in setting out the scale of the challenges facing individuals, government and businesses. “If we are serious about reducing economic inactivity and contributing to the Government’s ambition of economic growth, then we need joined-up action not only helping people back into work, but more importantly stemming the flow of people out of the work.