UK's falling fertility rates could 'stagnate economy'

UK prime minister Boris Johnson at a visit to the Monkey Puzzle Nursery in west London. The SMF has suggested the government could put more incentives in place for younger people to have children amid falling birth rates. Photo: Jeremy Selwyn/POOL/AFP via Getty

The UK could be facing long-term economic stagnation as falling fertility rates exacerbate the country's “baby bust,” according to a new think tank report.

The Social Market Foundation (SMF) has found the long-term trend towards people having fewer children could leave the UK with fewer workers, a weaker economy and unsustainable public finances. Scotland faces a particularly acute problem.

The SMF said the demographic outlook for Britain should spark public and political debate about the scope for government policies to help people who want to have more children to do so.

Effective interventions could include payments to parents, greater parental leave entitlement and, especially, cheaper childcare, the think-tank said. However, it also cautioned that such policies can be very costly whilst only delivering modest increases in the birth-rate.

Birth rates in Britain are on the decline. In 2020, the total fertility rate (TFR) — the number of children per woman — stood at 1.58 in England & Wales, almost half the post-World War II peak of 2.93. The recent decline in fertility is even more pronounced in Scotland, where the TFR is 1.29.

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Since the early 1970s, the TFR has been below the critical replacement rate of 2.1 children. The SMF said that depending on the scale of immigration and trends in life expectancy, the UK could see its population shrinking in the 21st century.

“Many other liberal democracies are exploring the use of policies like cash payments to parents, more generous parental leave and cheaper childcare to make it easier for those that want children to have them,” Aveek Bhattacharya, chief economist at the SMF.

“Here in the UK we should consider the merit of these policies — not least because they would bring many other benefits to parents, children and wider society.”

Britain could also face long-term shortages of working-age adults. At present there are a little under three over 65s for every ten workers, but by the middle of the next decade that ratio will rise to 3.5. By the 2060s the number will be closer to 4.

Meanwhile, by 2050 a quarter of Britons will be over 65, up from a fifth today.

“This combination of a lower share of the population in work and a higher share in need of economic support clearly has a negative effect on the productive capacity of the economy,” the SMF said.

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The SMF has recommended that a cross-government task force should consider the issue, and a parliamentary inquiry into birth-rates should be established. It also floats the possibility of Whitehall officials adopting a “Population Test” where every policy is scrutinised to estimate its likely effect on the birth rate.

Several governments around the world including France and Poland have explored policies that can make it easier and more attractive to have children. The SMF suggested that better childcare provision could be a promising intervention for Britain to focus on.

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