UK Firms Shun Youth Hiring Amid Rising Costs, MPs Told
British companies are increasingly unable to afford hiring young people due to prolonged cost pressures that have eroded profit margins and disrupted recruitment strategies, according to business leaders. Rising labour expenses, including government-mandated increases to the minimum wage and employer's national insurance, have pushed young workers to the back of the queue in hiring decisions, as revealed by business lobby groups in testimony to MPs.
Employment Rights Act Could Worsen Situation
The groups also cautioned that the Employment Rights Act might exacerbate the issue by discouraging employers from "taking the risk" of hiring less-experienced youth with limited skills or workplace history. The British Chambers of Commerce (BCC) predicts the unemployment rate will climb to 5.5% this year, with young people likely to be disproportionately affected.
Recent data from the Office for National Statistics shows the unemployment rate stood at 5.2% in the three months to December, impacting 1.9 million individuals. Among 16- to 24-year-olds, 957,000 were out of work, highlighting a severe challenge for this demographic.
Survey Reveals Alarming Trends
A survey by the Federation of Small Businesses (FSB) covering the three months to December 2025 found that 26% of firms were employing fewer workers compared to the previous quarter. Chris Russell, senior policy manager at the FSB, noted this is the worst percentage recorded since the survey began over a decade ago, indicating a significant downturn in hiring.
Kate Shoesmith, director of policy and insights at the BCC, emphasized that businesses are striving to survive, with many wanting to hire but hindered by escalating costs. She stated, "Businesses are trying their level best to stay afloat right now," adding that recruitment expenses are severely impacting firms.
Inquiry into Rising Neets and Social Concerns
These warnings emerge as MPs on the all-party work and pensions committee investigate the surge in young people not in education, employment, or training (Neets), which has neared 1 million. Last year, the government tasked former health secretary Alan Milburn with reviewing youth unemployment and economic inactivity.
Milburn warned that young people face an existential crisis, with growing societal fears that their prospects for employment and home ownership are worse than previous generations. He remarked, "I think people feel that the social contract that we've had in society – that each generation would do better than the last – is now being broken."
Business Growth and Global Uncertainties
Over half of firms in a BCC survey expressed concerns about struggling to grow this year, with additional anxieties over potential cost hikes linked to conflicts like those in Iran. Russell explained that rising employment costs are altering employer behavior, leading to a shift toward hiring candidates with higher skills and fewer CV gaps, which disadvantages young jobseekers.
FSB members reported in surveys that they increasingly seek more skilled recruits, further marginalizing youth in the job market. This trend underscores the bleak outlook for young people battling to secure work in a challenging economic landscape.
