One million young people are still locked out of work

Britain’s £125bn youth jobs crisis is far from over

The number of young people outside employment, education or training has finally fallen below one million. That is welcome, but it is no victory. Vacancies are scarce, hiring costs are high and the small businesses that could create jobs are being squeezed out of recruitment.

YOUTH JOBS CRISIS STILL COSTING £125BN A YEAR

The number of young people looking for employment, education or training (what Business111 calls LEETs rather than NEETs) has dipped just below the one‑million mark. This could be a sliver of good news and relief, but the labour market is still historically weak.

New figures from the Office for National Statistics show 981,000 people aged 16–24 were out of work in the three months to June 2026, down from 1,012,000 earlier in the year. That spike triggered alarm across Whitehall, the Treasury and the Bank of England.

The fall in the latest figures is welcome, but the underlying picture is bleak and it’s too early to tell whether Government’s efforts to address the problem will work. Some big businesses, like Sainsbury and Boots, are getting behind calls to get young people into work. That’s great but job vacancies are at a five‑year low, youth unemployment remains structurally high, and the LEETS tsar Alan Milburn warns the crisis is costing the UK £125bn a year in lost earnings, productivity, tax revenue and increased benefits spending.

Another huge problem that’s so far been ignored is that the small and micro businesses that traditionally create a disproportionately high number of jobs, have been taxed so hard they can’t afford to recruit.

Pressure Is Mounting

The PM has made tackling LEETS a priority, arguing, quite rightly, that the UK cannot grow if an entire generation is locked out of the labour market. We can’t afford to lose that talent.

Over the past month, Labour has expanded its Youth Jobs Guarantee, offering:

• £2,000 incentives for employers who hire young workers

• six months of paid work for Universal Credit claimants

• and targeted rollout to areas with the highest youth unemployment such as Essex, Greater Manchester and Birmingham.

The Work and Pensions Secretary Pat McFadden says the government is “determined to turn the tide”, calling the crisis “years in the making”.

The government’s wider £2.5bn investment aims to create almost one million opportunities to earn or learn.

The Crisis Isn’t Over

The drop from 1,012,000 to 981,000 is progress, but there’s little sign that it’s a turning point and there are three clear structural problems:

Vacancy levels are at a five‑year low: there are fewer entry‑level roles for young people especially in the hard pressed hospitality and retail sectors, fewer apprenticeships, and fewer routes into work.

Employers are cash-strapped and cautious: high costs including NICs, wages, energy, and insurance mean firms are hiring less, especially at junior levels. They need confidence before they will spend.

3. Skills mismatches: many young people don’t have the skills or qualifications employers need, and others are stuck in regions where jobs are very hard to come by for anyone.

The upcoming review is expected to warn that without deeper reform, LEETS will remain close to one million for years to come.

The Political Divide

The LEETS figures land alongside new Home Office data showing that 235,000 work visas were issued in the year to June plus 383,000 study visas issued in the same period. This has sharpened political debate over whether the UK is relying too heavily on migration to fill labour gaps while domestic youth unemployment remains high.

Business groups argue that both issues have to be tackled together. Skills shortages and youth unemployment together lead to a broken pipeline of workers. Businesses need the right skills to grow, and if the UK doesn’t have them, it will take years to train the people looking for work, leaving businesses stranded in the meantime. There must be a short- and long-term approach.

Small and Micro businesses

Small firms are central to solving the LEETS crisis, but they aren’t hiring because of the pressures they’re under from rising employment costs, the other rising costs of doing business and employment rights reforms. They also face weaker demand as customers struggle, and bills continue to rise. The burden of regulation is weighing on them too, because every new regulation or reform to regulation or legislation comes with costs in money and time.

The £2,000 hiring incentive helps, but microbusinesses say they need simpler hiring rules, lower employer NICs, easier apprenticeship access with better local training, and reduced admin. Without this, the Youth Jobs Guarantee risks being used mainly by larger employers and that’s not where the majority of the jobs are created.

A New Brain Drain

The fall in LEETS is good news, but it is not a sign of recovery. Youth unemployment is still costing the UK £125bn a year, vacancies are at a five‑year low, and the labour market is still fragile.

The Youth Jobs Guarantee may be beginning to make an impact, but deeper structural reforms such as tax simplification, lower hiring costs, better routes to the skills employers are looking for, are needed to shift the dial. The forthcoming review into the crisis will be critical, as long as it doesn’t sit on a shelf and gather dust. The UK can’t afford a million young people stuck outside the economy or taking their talent abroad.