Steep Rise in UK Youth Unemployment Amid Economic Challenges, AI, and Policy Changes
Since June last year, the UK has lost 170,000 payroll jobs, of which 46% (approximately 77,000) were among under-25s, averaging over 150 youth job losses per day. Youth unemployment for those aged 16 to 24 stands at 15.3%, marking the highest rate in a decade outside the Covid-19 pandemic peak. The under-25 demographic, constituting about 10% of the workforce, has disproportionately borne the brunt of job losses.
Several factors underpin this rise. The Bank of England cites the Labour government's £25 billion National Insurance Contributions (NICs) increase—which raised the employer NIC rate from 13.8% to 15% and lowered the earnings threshold from £9,100 to £5,000—as dampening hiring, especially in hospitality, retail, and health sectors. While exemptions exist for under-21s and apprentices under 25, critics argue that the higher pay floors, including a 6.7% rise in the National Living Wage to £12.21 per hour and a 16.3% increase for 18-21-year-olds to £10 per hour, may deter employers from hiring youth due to increased training and employment costs.
The acceleration of automation and artificial intelligence has further displaced simple and entry-level roles, particularly in retail, hospitality, and health sectors. Additionally, the Covid-19 pandemic disrupted education and exacerbated mental health issues, with over a quarter of 16-24-year-olds not in education, employment, or training (NEET) reporting mental health problems or disabilities—roughly double the rate in 2005.
Currently, about 1 million young people are NEET. Among them, 137,000 aged 18 to 24 have been unemployed for over 12 months—the highest figure in a decade. Long-term austerity policies have also contributed to barriers facing youth employment through crumbling public services, rising living costs, and flat wage growth. The Work Foundation highlights rising youth mental health issues since the mid-2010s as an additional challenge.
In response, David Blunkett has warned of a potential 'lost generation' and urged a revival of New Deal-style programs targeting youth employment. Alan Milburn has been appointed to lead an independent review on rising youth worklessness. The government plans to introduce a 'youth guarantee' providing guaranteed paid work to eligible young people on universal credit for 18 months, expand Youth Hubs, and aim to abolish long-term youth unemployment.
The upcoming Autumn Budget, due on 26 November 2025, is expected to feature measures focused on youth employment under Chancellor Reeves. Despite ongoing economic challenges, including inflation, high borrowing costs, and weak consumer demand amid budget uncertainty, these initiatives represent government efforts to address escalating youth unemployment and its associated social effects.
