UK expected to hit £125 billion annually due to youth unemployment | UK Unemployment and Employment Statistics

In the UK, the youth unemployment crisis is at risk of worsening after the number of young people without employment or education rose to more than 1 million, causing a financial hit of up to £125 billion a year.

In a landmark government-backed report, Alan Milburn warned that the UK’s economy and public finances were losing billions of pounds every year amid a growing risk of a “lost generation” of young people.

The former Labor cabinet minister said youth exodus was increasing economic risks for the country and called on the government to fundamentally reset policies covering schools, health services and the welfare state.

Figures from the Office for National Statistics on Thursday showed the number of 16-24 year-olds in England not in education, employment or training in the three months to March rose to 1,012,000, exceeding one million for the first time since 2013.

Line graph showing changes in the number of people aged 16-25 who are not in employment, education or training.

Speaking at the report’s launch, Milburn said the figures highlighted “perhaps the most important issue facing the country” amid growing awareness about the future prospects of Britain’s young people.

“This is actually more than a statistic. It’s a warning that too many young people reach adulthood with doors to opportunity closed to them,” he said.

It comes as overall unemployment in the UK is now at its highest level since the Covid pandemic, with young people being hit hardest as businesses warn of the impact of tax rises and an economic downturn in the aftermath of the Iran war.

In a major report published on Thursday, the Milburn review said the loss of contributions to the economy and the cost of supporting young people through the benefits system is leaving a financial hole worth billions of pounds.

“[However,] Major costs are not borne by taxpayers. It is borne by the young. Becoming a Neet has long-term scarring effects. “There is a cost to your confidence, there is a cost to your health, there is a cost to your future income,” he said.

“It’s a deposit that was never saved, a house that was never bought, and a pension that was never built.”

Alan Milburn said the figures highlighted ‘perhaps the most important problem facing the country’. Photo: Geoff Moore/PA

The report is the first part of Milburn’s findings before he submits final recommendations to the government in the fall.

Warning of the long-term damage to young people, former Health Secretary Tony Blair warned that the average lifetime loss of earnings due to NEET between the ages of 18 and 24 was equivalent to £52,000 a year.

“The longer young people are out of work or learning, the harder and more expensive it is to help them back out. In this review, we estimate the cumulative annual cost of nearly one million NEET young people to our country at £125 billion – more than we spend on education each year,” the report said.

“The question is no longer whether the current position makes sense, but whether it is sustainable.”

If all Neet 18-24 year olds were in work, they would have contributed £38 billion more to the UK’s gross domestic product (GDP) while reducing welfare costs for the Treasury, the report said.

The report warned that the lifetime impact on public finances for young people aged between 18 and 24 becoming a Neet is on average £29,000 per year.

Analysis shows that the government spends around £8.1 billion a year on direct benefits for young people through the welfare system, with more than half (£4.4 billion) going to NEETs.

The report found that around £3.2 billion was spent on disability benefits through personal independence payments available to people in and out of work. But the report said increased spending on employment support and an overhaul of the education system and the UK labor market could help young people find jobs.

Milburn estimated that £3.2 billion of total benefit costs could have been avoided if Neet young people had worked and earned above the income threshold.

He said it was “shocking and shameful” that for every £25 spent on welfare, the government spends £1 on employment support. Only one in five NEET youth receive meaningful help finding work, leaving young people “locked in on benefits”, he added.

“The welfare system must always protect those who cannot work. That is non-negotiable. But for young people who can participate, the welfare system must support them to do so. That is not the case today.”

But new attempts at welfare reform could prove divisive, with concerns that welfare cuts following Starmer’s chaotic benefits U-turn last year risk deepening poverty amid a cost-of-living crisis.

At the launch of the report, Work and Pensions Secretary Pat McFadden said the Government had made a “significant and important start” to tackling youth unemployment through a jobs guarantee. But he acknowledged ministers needed to take further action.

“I have commissioned this report, but I want to make clear that responding to it is not just the cause of one department or one Secretary of State,” he said.

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