Britain could face a “lost generation” of young people trapped outside work and education, according to a government-commissioned report warning that one in six young adults may become
economically inactive within five years.
The study, led by former health minister Alan Milburn, paints a stark picture of rising youth disengagement in the aftermath of the COVID-19 pandemic. While Britain historically maintained relatively low youth unemployment compared with much of Europe, the proportion of 16- to 24-year-olds not in employment, education or training — known as NEETs — has climbed sharply and is now among the highest on the continent.
Official figures released on Thursday showed the number of NEETs exceeded one million in the first quarter of the year, reaching 13.5% of young people, up from 12.5% a year earlier and the highest level since 2013.
“Detachment is no longer temporary. For too many young people it is becoming permanent,” Milburn said at a press conference. “We are at risk of a lost generation.”
He described youth inactivity as “probably the most significant challenge facing our country today,” adding that public concern over the issue was stronger than for any other policy area he had dealt with during his political career.
The findings come at a difficult moment for Prime Minister Keir Starmer’s government, which is struggling in opinion polls as voters increasingly focus on economic pressures and the rising cost of living.
The report argues that Britain’s welfare system is “exacerbating inactivity” while opportunities for low- and medium-skilled entry-level work have diminished significantly over the past decade. Traditional first jobs, including part-time weekend work for teenagers, have become less common even during periods of broader labour market growth.
Six in ten NEETs have never held a job, compared with four in ten two decades ago. More than 70% lack strong school qualifications, though around 15% hold university degrees. Health issues are also playing a growing role: 44% reported that poor physical or mental health limited their ability to work, up from 26% a decade ago. The increase has been driven largely by rising mental health conditions, learning difficulties and neurodiversity-related challenges.
Economically, the consequences are substantial. The direct annual welfare cost linked to youth inactivity is estimated at £3.2 billion, but the report suggests bringing all NEETs into full-time employment could add £38 billion to the economy. If long-term joblessness becomes entrenched, the annual cost in lost economic growth could reach £125 billion.
Despite strong demand among young people for work and training opportunities — with 84% expressing a desire for employment or skills support — the report found government spending remains heavily skewed toward welfare payments rather than employment assistance. For every £25 spent on benefits for this age group, only £1 goes toward helping them into work or training.
The study also highlighted the growing difficulty inexperienced workers face entering the labour market. Entry-level jobs now require higher skills and experience than in the past, while work placements and vocational opportunities have narrowed.
British governments have attempted to expand apprenticeship schemes, though they remain far less developed than systems in countries such as Germany and the Netherlands.
Business leaders echoed concerns raised in the report. Stuart Machin, chief executive of retailer Marks & Spencer, said the findings were “shocking but not surprising,” reflecting concerns he regularly hears from staff and customers.
Some employers argue that rising labour costs — particularly sharp increases in the minimum wage for younger workers — have made companies more cautious about hiring inexperienced staff. The report acknowledged these pressures, stating that “when the cost of entry-level labour rises, the case for taking on someone inexperienced becomes harder unless employers are given support to offset the risk.”
However, the report concluded there was little evidence that minimum wage increases alone were driving the surge in youth inactivity. Milburn rejected suggestions that recent tax and regulatory changes introduced under Labour were the main cause.
“Let’s not pretend that’s the root cause of the problem,” he said.
Milburn is expected to present detailed policy recommendations later this year as ministers face mounting pressure to tackle what the report describes as a deepening national crisis among young people. Photo by Phil Whitehouse, Wikimedia commons.
