Youth Unemployment Set to Rise: What It Means for Business

For employers and policymakers alike, the issue is more than a seasonal spike in jobseekers. It reflects deeper structural pressures in the economy and raises important questions about growth, workforce planning and long-term productivity.

A Growing NEET Population

Robert Salter, Director, commented:

The UK has a significant number of young people who are not in employment, education or training (NEETs). Wider problems in the job market are likely to make this worse with millions of school leavers and new graduates scheduled to enter the labour market in the coming months.

Over 15% of all 16 to 24-year-olds are now NEETs. The latest figures from the Office of National Statistics (ONS) show that the job market is becoming increasingly difficult for all job seekers, with unemployment for December 2025 rising to 5.2%, up from a rate of 4.4% when the Government came to power in July 2024.

While a one-percentage-point rise may not appear dramatic, the direction of travel is clear. A weakening labour market typically hits younger, less experienced workers hardest.

A Wave of New Entrants

An estimated 900,000 students are expected to graduate from universities and colleges over the next few months, while many more 16–18-year-olds will also be looking for their first jobs at the same time. The ONS statistics paint a bleak picture for their ability to find and retain employment.

In a buoyant economy, this annual influx can be absorbed. In a slowing one, it risks pushing youth unemployment sharply higher – particularly if businesses are cautious about hiring or freezing entry-level recruitment.

For employers, this could create a paradox: a large pool of available talent, but limited appetite to expand headcount amid economic uncertainty.

The Policy Context: Cost Pressures on Employers

Some of the Government’s key policies over the last 18 months such as the sharp increase in the National Minimum Wage, the increase in employer National Insurance Contributions (NICs) and the introduction of new Employment Rights could make it even more difficult for young job seekers.

Higher wage floors and employment protections can improve worker security but they also raise the marginal cost of hiring, particularly for entry-level roles where productivity may initially be lower.

For small and medium-sized enterprises (SMEs), which traditionally provide a large share of first jobs, increased National Insurance Contributions and compliance obligations may make hiring decisions more cautious. Apprenticeships, internships and junior roles are often the first areas to be trimmed when cost pressures mount.

The Bigger Issue: Growth and Economic Direction

Robert warns:

However, a greater concern is not just the immediate increase in joblessness, but that the Government does not have a clear focussed policy for the overall economy. Without growth, the job market will not improve for anyone.

This is a critical point for business leaders. Youth unemployment is often a leading indicator of wider economic strain. If businesses are not expanding, investing or innovating, demand for labour at all levels stagnates.

Long-term youth unemployment also carries lasting economic costs. Research consistently shows that extended periods out of work early in a career can depress lifetime earnings, reduce skills accumulation and weaken overall productivity. For employers, that translates into a smaller pipeline of experienced talent in future years.

Why This Matters to Business

For business leaders, the implications are both immediate and strategic:

Talent pipeline risk: A generation struggling to enter the workforce today may mean skills shortages tomorrow.

Consumer demand: Young people are consumers; higher unemployment dampens spending power.

Social and reputational impact: Businesses increasingly face scrutiny over their role in supporting social mobility and economic opportunity.

Policy engagement: Employers may need to play a more active role in shaping workforce and growth policy discussions.

At the same time, firms willing to invest in early-career recruitment during downturns can benefit from stronger retention, loyalty and long-term returns when growth resumes.

What You Should Consider Next

In light of these trends, businesses and individuals should consider:

Review workforce planning: Are entry-level roles, apprenticeships or graduate schemes being cut reactively and what are the long-term consequences?

Assess cost structures: Model the combined impact of wage increases, employer NICs and new employment rights on hiring decisions.

Explore alternative pathways: Could structured internships, training partnerships or phased hiring mitigate risk while maintaining talent inflow?

Engage with policy: Industry groups and business leaders may wish to advocate for growth-focused measures that support sustainable job creation.

For individuals: Graduates and school leavers may need to broaden job searches, consider interim roles to build experience, and prioritise transferable skills development.

Would you like to know more?

If you would like to discuss any of the above, please speak to your usual Blick Rothenberg contact or Robert Salter using the form below.