Business leaders have issued a warning that the UK could face a “lost generation” if ministers do not take immediate measures to prevent young people from distancing themselves from the workforce. The British Chambers of Commerce (BCC) expressed concerns about official data indicating nearly one million individuals aged 16 to 24 are neither in education, employment, nor training (NEET). This is especially concerning given the need to cultivate new talent in an aging population.
Despite the unreliability of the data from the Office for National Statistics’ labor market survey, separate tax record data suggests that jobs for young people have been significantly affected recently. Rising labor costs and economic uncertainty are impacting hiring practices. New figures from job search website Adzuna, to be released on Monday, reveal a drop in vacancies for new graduates to a two-year low in March, even as overall hiring begins to recover following tax rises outlined in Chancellor Rachel Reeves’ October Budget.
Shevaun Haviland, the Director-General of the BCC, stated that Generation Z, typically those born between 1997 and 2012, face increasing barriers to workforce entry with fewer opportunities as vacancies decline. A BCC report highlighted that a quarter of those categorized as NEET are eager to work but are impeded by mental health challenges.
Haviland emphasized that delaying action will make it harder for this talent pool to engage, warning that comprehensive measures are necessary to prevent a generation from being marginalized. However, businesses are concerned about being burdened with the costs of hiring, training, and supporting young people perceived as risky hires, while also dealing with impending reforms to workers’ rights that could complicate dismissals.
The government is optimistic that recent welfare reforms, including cuts to disability benefits and expanded back-to-work initiatives, will assist young individuals with mental health issues in securing employment and building careers. Former John Lewis boss Sir Charlie Mayfield has been tasked with exploring how businesses and the government can aid ill and disabled individuals in entering and remaining in the workforce.
Mayfield is expected to release detailed policy recommendations in the autumn. His previous report noted that it might currently be less costly for employers to replace workers who fall ill than to invest in their retention.
The BCC asserted that for businesses to contribute effectively, the government must “avoid introducing additional cost, risk, and restrictions” through workers’ rights reforms pending in parliament. The lobby group, representing numerous small businesses, advocates for increased government spending on mental health support and further education. It also calls for a collaborative approach among Whitehall departments.
Additionally, the BCC urged ministers to prevent social care pressures from impacting local authorities’ skills budgets and to provide subsidies to employers that offer work placements or hire NEET young people with minimal qualifications. Tax incentives for employers providing workplace health services could be coupled with a requirement for larger companies to publicly report on health provisions.
Employers are encouraged to offer flexible work arrangements and train managers to better support young employees at risk of dropping out. The Department for Work and Pensions stated that ministers are committed to ensuring no young person is left behind, with expansions in mental health support, jobcentre overhauls, and guaranteed apprenticeships, training, or job support for all individuals aged 18 to 21.
The BCC report noted that details on the implementation of this Youth Guarantee, or funding for the initial “trailblazer” areas, remain unclear for the duration of the parliament.
