The UK is facing an “economic inactivity crisis” as employers are losing an estimated £85bn a year in costs linked to sickness and poor workplace health, a landmark report has found.

More than one in five working-age people are now out of work and not looking for work – more than comparator countries – which is costing the UK £212bn a year, the Mayfield review said.

Its author, former John Lewis boss Sir Charlie Mayfield, says poor health “has become one of the biggest brakes on growth and opportunity,” but says it is not inevitable.

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The report, published on Wednesday, says there are now 800,000 more people out of work now than in 2019 due to health problems, and without “decisive action” to address this, another 600,000 people will be added by 2030.

Sir Charlie found that a 22-year-old who is not in work for health reasons could be more than £1 million worse off over their lifetime, while employers are losing an average of £120 per day in profit from absences.

The cost to the state is also vast – it is costing 7% of GDP, or almost 70% of the income tax we pay, through “lost output, increased welfare payments and additional burdens on the NHS”, which is “unsustainable”.

The additional burden in welfare payments and NHS demand is around £47bn annually, the report says.

Among the reasons for these absences continuing to mount is a “culture of fear” felt by both employers and employees, that “creates distance” and “discourages safe and early disclosure, constructive conversations and support,” Sir Charlie found.

He wrote that there is a “a lack of an effective or consistent support system for employers and their employees in managing health and tackling barriers faced by disabled people” that are “structural”.

But he says “these problems are not inevitable,” adding: “What is missing is coordination, focus, and a coherent framework for change.”

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Sir Charlie’s report is “proposing a fundamental shift from a model where health at work is largely left to the individual and the NHS, to one where it becomes a shared responsibility between employers, employees and health services”.

Employers must “act on prevention, to support rehabilitation, and to remove barriers for disabled people,” he says.

His message to employees is: “Work can be demanding. Setbacks are part of life. Health and work are not always easy partners, but they are mutually reinforcing. Supportive workplaces matter, and so does personal responsibility.”

But he also calls on the government to “reset the system – to enable and incentivise employers and employees to act”.

“System issues such as fit note reform, dispute resolution and links with programmes like Pathways to Work will also demand coordination,” he wrote, calling for political leadership across a range of government departments to spearhead change.

The review also calls for the adoption of a workplace health provision, which is described as a non-clinical case management service supporting employees and line managers across a so-called healthy working lifecycle.

It says this approach of offering support and advice and early intervention could be integrated with the NHS App and reduce or replace the need for the current fit note.

The government says more than 60 employers – including the British Beer and Pub Association, Burger King, John Lewis and Google UK – have expressed interest in becoming so-called vanguard employers to pioneer the overall new approach.

This would involve a three-year phase focused on how to address mental health at work, retention of older people in work and improved participation and retention of disabled people in work.

Business Secretary Peter Kyle told broadcasters said the aim of this initial scheme would be to see “what works, what is possible”, and they have agreed to share their findings with the government with the aim of “spread[ing] that learning” to businesses across the country.

Health is ‘essential for economic growth’

Sir Charlie said: “Employers are uniquely placed to make a difference, preventing health issues where possible, supporting people when they arise, and helping them return to work.

“If we keep Britain working, everyone wins – people, employers and the state.

“That’s why the action the government is taking forward from my review is so important. I’m looking forward to working with them and with employers, large and small, to keep people in work, unlock potential and build a healthier, more prosperous Britain.”

Work and Pensions Secretary Pat McFadden said Sir Charlie’s message was “crystal clear: keeping people healthy and in work is the right thing to do and is essential for economic growth”.

“Business is our partner in building a productive workforce – because when businesses retain talent and reduce workplace ill-health, everyone wins.

“That’s why we’re acting now to launch employer-led vanguards as part of the Plan for Change, driving economic growth and opportunity across the country.”

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Conservative shadow business secretary Andrew Griffith said that while he welcomes the report and its findings, he is worried about the impact of the government’s Employment Rights Bill, that is returning to the Commons this afternoon.

He told Mornings with Ridge and Frost: “I think we need to give employers more opportunity and reasons to hire young people, and that (the Bill)… will put up all sorts of barriers and create incentives for them not to take a chance when they’re giving young people a job.”