Youth unemployment nearing Covid and 2008 levels with decline 'setting off alarm bells'
An alarming decline in the proportion of young people in employment has led to rates approaching those triggered by major shocks such as the Covid pandemic and the 2008 economic crash, analysis has shown.
Listen to this article
The findings will be “setting off alarm bells among ministers”, researchers said, as they called for more evidence on the causes of a trend that threatens to have long-term consequences for many young people.
The rise in youth joblessness is the primary factor in the proportion of young people not in education, employment or training (Neet), as concerns grow about a high-profile, deep-rooted problem that analysis suggests may not ease when economic conditions improve.
An assessment by the Institute for Fiscal Studies (IFS) showed the proportion of 16 to 24-year-olds in payrolled employment dropped by 4.3 percentage points, from 54.9% to 50.6%, between December 2022 and December 2025.
This decline is equivalent to 330,000 young people being affected.
Read more: 163,000 British jobs at risk amid Iran war fallout, report warns
Read more: Unemployment drops sharply as inactivity in jobs market rises
The fall during the Covid pandemic was 6.5 percentage points, while the decline around the 2008 financial crisis was 5.4 percentage points.
The share of young people who are Neet increased from 10.8%, equivalent to 760,000 people, in 2022 to 12.8% (960,000) at the end of 2025.
When the UK rates are compared to other countries in the OECD, historically the UK has had high youth employment rates, but one of the lowest proportions of 18 to 24-year-olds in education.
The IFS said the findings suggest “structural changes may be specifically affecting young people”, including the prominence of AI or worsening youth mental health.
The analysis also showed changes in employment significantly differed by age.
For 22 to 24-year-olds who have largely completed their studies, employment rates fell by 4.8 percentage points to 66.1% between 2022 and 2025.
This coincided with a 7.3 percentage point decline among 16 and 17-year-olds, which the IFS said likely reflected at least in part a fall in casual work while studying.
The proportion of 18 to 24-year-olds receiving out-of-work benefits increased by 1.4 percentage points, equivalent to 84,000 people, between 2022 and 2025.
Just over half of this rise was because of inactivity-related benefits where the claimant is not required to search for work, the IFS said.
Nearly one in nine 18 to 24-year-olds, amounting to 640,000 people, claimed an out-of-work benefit at the end of 2025.
The research found the fall in labour market participation is widespread across regions and nations, with employment falling by at least three percentage points in eight out of the 12 areas, including a four percentage points fall in London.
The share of 18 to 24-year-olds claiming out-of-work benefits increased in all areas, but the composition of benefits varied, with inactivity-related benefits accounting for a bigger share of the increase in the North of England, Scotland and Wales.
These trends are unlikely to be purely driven by a cyclical downturn in the economy which might be expected to eventually right itself on its own, the IFS concluded.
It added the data available does not show whether recent increases in minimum wages have had a sizeable effect on employment or not, but said “central estimates suggest that it is likely that other structural factors are playing a role”.
The IFS said that given the “historical relationship” between Neet figures and adult employment, the rates for young people are higher than expected.
It added: “Recent changes in youth and adult employment rates across regions are not very strongly correlated, unlike what one would expect in a cyclical downturn.”
Jed Michael, research economist at the IFS and an author of the report, said: ‘The fall in youth employment across the UK is likely to be setting off alarm bells among ministers – not least because we know that unemployment early in one’s career can have lasting negative consequences.
“The job of the Milburn Review, set up to tackle the rise in Neets, is made much harder by a lack of clarity as to what is driving the fall.
“While it does not seem to be down solely to a temporary cyclical downturn in the economy, more evidence is needed to understand the roles of minimum wages, youth mental health, AI and other factors.
“Without this evidence, expensive policies to reduce the Neet rate are shots in the dusk, if not the dark.”
Jonathan Townsend, chief executive of The King’s Trust which funded the research, said: “These findings should concern anyone who cares about young people’s futures.
“Too many young people are already out of work, education or training, and this analysis suggests we cannot simply assume the problem will correct itself as economic conditions improve.”
The findings are part of an IFS analysis published ahead of the release of the latest labour market statistics by the Office for National Statistics on Tuesday.
The Government has set a target for two-thirds of young people to be in higher education, higher-level training or doing a gold standard apprenticeship by the age of 25.
It is claimed about 65,000 young people will be able to train to enter the defence, clean energy, digital and manufacturing industries under the latest round of Government investment into colleges.
The Government will provide £175 million for 19 new technical excellence colleges across the country to deliver training in sectors deemed important for the future of the UK.
A Government spokesperson said: “As we have set out, too many young people are locked out of opportunity, work and education – and we inherited an unacceptable rise of 250,000 Neets.
“We are determined to change that with the youth guarantee which will give young people across the country the chance to earn or learn, including with grants, apprenticeships and subsidised employment.”