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The UK risks creating a “lost generation” unless ministers take immediate action to stop young people drifting away from the workplace, business leaders warned on Sunday.
The British Chambers of Commerce said employers were increasingly concerned by official data suggesting almost 1mn people aged between 16 and 24 were not in education, employment or training (NEET), despite the need to foster new talent as Britain’s population aged.
These figures, based on the imprecise Office for National Statistics’ labour market survey, are unreliable. But separate data based on tax records also suggests jobs for young people have been hardest hit in recent months, as rising labour costs and mounting economic uncertainty weigh on hiring.
New figures to be published by job search website Adzuna on Monday show the number of vacancies for new graduates fell to a two-year low in March, even as overall hiring began to recover from the slump that followed employer tax rises set out in chancellor Rachel Reeves’ October Budget.
Shevaun Haviland, director-general of the BCC business group, said Gen Z — generally defined as those born between 1997 and 2012 — faced both higher barriers to entering the workforce and dwindling opportunities as the number of vacancies fell.
A report published by the BCC on Sunday cited evidence that a quarter of those classed as NEET wanted to work, but could not because of their mental health.
“The longer we leave this pool of talent to drift away from the workplace the harder it becomes for them to engage,” Haviland said. “Unless more comprehensive action is taken a whole generation is at risk of being cut loose from society.”
However, businesses are also worried that they will be asked to carry the costs of hiring, training and supporting young people whom they see as a risky bet — while also absorbing the impact of a sweeping upgrade of workers’ rights that will make it harder to fire new recruits.
The government hopes that welfare reforms announced last month, including big cuts to disability benefits and an expansion of back-to-work support, will help young people with mental health problems enter the workforce and forge a career.
Ministers have tasked Sir Charlie Mayfield, former boss of retailer John Lewis, with finding ways for businesses and government to help ill and disabled people enter and stay in work.
Mayfield, who will publish detailed policy recommendations in the autumn, said in a report last month that employers could at present find it cheaper to replace workers who fell sick than to invest in their retention.
But the BCC said that if businesses were to play their part, the government needed to “avoid introducing additional cost, risk and restrictions” through workers’ rights reforms, which are now going through parliament.
The lobby group, which represents large numbers of smaller businesses, wants the government to spend more on mental health support and further education, and Whitehall departments to “adopt a more collaborative approach”.
It also called for ministers to ensure that the pressures on social care do not eat into local authorities’ skills budgets, and offer subsidies for employers to provide work placements or hire NEET young people with few qualifications.
Tax breaks for employers offering workplace health services could be accompanied by a new requirement for larger companies to report publicly on their health provision, its report said.
Employers should also offer flexible work where needed and train line managers to give young people more support when they were at risk of dropping out, the BCC added.
The Department for Work and Pensions said ministers were “determined that no young person gets left behind” and were expanding mental health support, overhauling jobcentres and offering a guarantee of an apprenticeship, training or job support for all 18- to 21-year-olds.
However, the BCC noted in its report that it was not yet clear how this Youth Guarantee would be delivered or whether eight initial “trailblazer” areas would be funded for the duration of the parliament.
