Lack of Social Mobility Costs the UK Economy £19bn a Year

22 October 2024

• New report from Demos and Co-op reveals greater social mobility could increase UK business profits by £1.8bn per year
• Almost two-thirds of businesses say social mobility is a priority according to new survey
• One in four (29%) UK consumers are more likely to purchase from a company promoting social mobility
• Co-op CEO has called on businesses to take further action on the unfairness that workers can face to give UK productivity a “shot in the arm"

Co-op and Demos today reveal that the UK economy is missing out on £19bn in GDP growth every year due to a systemic failure to promote greater social mobility in the workplace*.

A new report by Demos, in partnership with Co-op – The Opportunity Effect – uncovers that greater social mobility could generate £6.8 billion in yearly tax revenues for the Government from additional economic activity – enough to pay for over 170,000 teachers or fund 884,000 school places**. Using regression data analysis, the report identifies the potential estimated benefits are comparable to adding 540,000 new jobs to the economy or increasing private sector GDP by 1.5% – equivalent to adding a city the size of Glasgow to the economy.

It comes as Co-op calls on the Government to accelerate its commitment to make socioeconomic background the tenth protected characteristic under the 2010 Equality Act.

The report also finds that if employers were to take-up five strategies that support greater social mobility, this could equate to a £1.8bn rise in private sector business profits.

Demos’s report surveyed 500 senior business leaders across different sectors*** on their social mobility strategies. It finds that three in four (76%) felt that promoting social mobility would help attract and retain staff, while 71% believed it would help achieve business results.

Almost two-thirds (64%) say they were committed to at least five strategies that targeted increasing levels of social mobility.

The report makes a series of recommendations to the Government and businesses to promote social mobility and improve how the private and public sector work together. These include:

• Give Skills England a statutory responsibility to increase social mobility
• Create a government-backed ‘Better Opportunities Fund’ to co-invest in social mobility projects in partnership with the private sector
• Consult large employers on increasing minimum training and skills expenditure, to meet the EU average of £3,000 per employee
• Introduce a lower rate of business rates for social enterprises and cooperatives to boost social mobility
• Ensure social mobility is factored into public sector procurement
• Consult on expanding pay gap reporting to socioeconomic backgrounds – Co-op, which became the first retailer to publish a socioeconomic pay gap report earlier this year, urges other businesses to do the same
• Encourage businesses to ask job applicants to voluntarily share socioeconomic information
• Create a ‘Social Mobility Data Lab’, bringing public and private organisations together

The report also comes as a Co-op survey of 2,000 UK adults published today, finds that one in four (29%) are more likely to purchase from a business promoting social mobility. The figure was higher amongst young consumers aged between 18-34, at over 40%.

Shirine Khoury-Haq, CEO of the Co-op, said:

“This report marks an important moment in the UK’s productivity debate and puts social mobility at the heart of that discussion. It shows that breaking down barriers to opportunity can be a much-needed boost for the UK’s economy and for business performance. The benefits are too great an economic prospect to ignore.

“We have seen that countries with greater levels of social mobility are much better at promoting job matching success and greater productivity. These are systemic challenges for the UK which this Labour government – the most working-class Cabinet in history – has correctly identified in its pledge to grow the economy****. But it will require bold action to deliver and we need incentives for business to make changes if we are going to harness the true economic potential of enhancing social mobility.

“At Co-op, we’ve made social mobility a core part of our strategy, becoming the first retailer to publish a socioeconomic pay gap report. Being able to support colleagues when they need it, and in particular women, helps retain valuable talent and makes good business sense. But we cannot do it alone. We ask that businesses, the public sector and government work collaboratively to embed support for greater social mobility within our working cultures. It cannot be right that our life chances are often defined by our backgrounds, and this is an open goal of an opportunity on which we must take action.”

Rt Hon. Alan Milburn, Chair of the Social Mobility Foundation, said:

“Improving opportunity in Britain's workplaces is not only a social imperative, but an economic one too. By doing more to tap the potential that exists among people from all backgrounds, businesses can become more profitable and more competitive. Higher levels of social mobility will accelerate our country's economic growth. It’s time for businesses to act.”

Billy Huband-Thompson, Lead Researcher at Demos, added:

“This report clearly demonstrates that putting our shared interests at the heart of decision making has benefits for individuals, but also our economy. Tackling barriers to employment and career progressions are a key part of enabling people to have access to good, meaningful work. We hope the publication of this report will encourage greater collaboration between the public and private sector so we can collectively take the opportunity that waits before us.”

This report comes as part of Co-op’s wider campaign to promote social mobility, which also includes campaigning for the government to make socioeconomic background the tenth protected characteristic under the 2010 Equality Act.

Following the publication of this report, Co-op is calling on businesses to share feedback on what support they need to champion social mobility in the workplace. Next year, Co-op will be developing business toolkits offering practical steps businesses can take, informed by the feedback received.

ENDS

Notes to Editors

*Based on an estimated private sector GDP of £1,250bn for 2023, 1.5% of this is around £19 billion. This is an estimate of what the impact would be if all businesses adopted five or more mobility strategies.

**Figures based on £6.8 billion potential tax revenues for Government identified by Demos, divided by the highest minimum salary for a qualified teacher at £38,766 according to the DfE (source) and the per-pupil funding for schools for 5-16 year old pupils in cash terms for 2024-25 at £7,690 according to the DfE (source).

***Sample grouped into “Logistical & Financial Services”, “Retail”, “Other Services” and “Production & Construction”

****The Sutton Trust (2024), Sutton Trust analysis of Labour cabinet

The Opportunity Effect: How social mobility can help drive business and the economy forward is a collaborative report conducted by Co-op and Demos, with support from Landman Economics, Focal, Yonder and Opinium. The full report can be read here. The research also predicts that even with a 20% increase in businesses taking-up just two targeted strategies, there is a potential benefit of £5bn in GDP and £3.2bn in tax revenue available from higher economic output due to increased social mobility – equivalent to 143,000 full times jobs.

Co-op is calling for businesses to provide feedback on how to promote social mobility here: https://coop.uk/socialmobilitysurvey

The ‘Better Opportunities Fund’ – This would be modelled on the Life Chances Fund but with a stronger focus on supporting social mobility through education and training programmes in collaboration with businesses. The Better Opportunities Fund should fund long term interventions that build on programmes with a track record of success and can demonstrate buy-in from a wide range of stakeholders in the private sector. This will ensure that funded projects have maximum chance for success. Private businesses with corporate social responsibility programmes in this area should be given the opportunity to co-invest with the government and co-produce the design of the fund so that they pool resources and expertise.

About Co-op

Co-op Group is one of the world’s largest consumer co-operatives, with interests across food retail, funerals, insurance, and legal services. Co-op is owned by and run for its 5.5 million members. With over 2,300 food stores and more than 800 funeral homes, Co-op also supplies products to 6,000 other outlets, including those run by independent co-operatives, through its wholesale business, Nisa Retail Limited. Employing 55,000 people, Co-op has an annual turnover of over £11 billion and is a recognised leader in social goals and community-led programmes. Co-op exists to meet members’ needs and champion the causes they believe in.

About Demos

Demos is Britain’s leading cross-party think-tank: an independent, educational charity, which produces original and innovative research.