Ministers need to urgently tackle youth unemployment or one in six young people will not be in employment, education or training (NEET) within five years, a major review has warned.
The interim report of the government commissioned review by former health secretary Alan Milburn said young people are being failed by a “broken system”.
It found that six in 10 young people who are currently NEET have never had a job, up from four in 10 in 2005, and the government spends 25 times more on welfare for 16-24 year olds than it does on helping them get jobs.
Apprenticeship starts for 16–24 year olds have fallen by 35% since the Apprenticeship Levy was introduced in 2017, and Level 2 starts, the entry-level provision that matters most for young people outside work, have fallen by 68%.
Only 2% of current apprentices were previously NEET, which the report said shows the system is not reaching the young people who need it most.
In addition, over the past 20 years, the number of mid- and lower-skilled jobs in the
economy has fallen by around 1.6 million, and hospitality vacancies have reduced by around half in four years.
Warning that “we are at risk of a lost generation”, the report said:
“At the very point when they should be starting adult life, gaining confidence, building skills, learning the habits of work and taking their first steps towards independence, too many are becoming detached from education and employment altogether.”
As the report was released, new data from the Office of National Statistics found that an estimated 1,012,000 young people were NEET in January to March, an increase of 55,000 from October to December 2025. It amounts to 13.5% of 16 to 24-year-olds and is the first time it has been more than a million since 2013.
The report warned that the total number of NEETs could rise to 1.25 million by 2031 if steps are not taken to properly fix education, health and welfare systems that are “no longer fit for purpose”.
It said that the current cost of NEETs to the economy is £125 billion, more than the UK spends on education, and of the estimated £8.1 billion spent on young people accessing key benefits, around £4.4 billion goes to NEETs with an estimated £3.2 billion that could have been avoided if those people were in work and earning above the earnings threshold.
Ill-heath ‘a primary driver of who becomes NEET’
Ill-health is also an issue, with the report saying “it is no longer a background factor in youth disengagement” and is “now a primary driver of who becomes NEET and who stays NEET”.
“For the first time in perhaps two centuries, changes in health, especially mental health, are impeding economic growth and causing a contraction in the supply of labour,” the study added.
One in five of all NEET young people reported mental health as their primary health condition in 2025, more than double the 7.7% in 2012, and disability rates among NEETs have more than doubled over the past 15 years.
The study described the duration of staying NEET as a consequence of illness as “devastating”. Of those who fell into this category between 2017 and 2019, almost eight in 10 were still NEET more than two years later. “This is not a transient problem”, the report warned, “it is long-term detachment driven by ill-health and by the inability of systems to accommodate health-based needs”.
But many young people are keen to be employed. A survey found that 84% wanted to find a job, education or training. Many NEETs are also well educated with 30% getting good GCSEs or equivalent, over 21% having a Level 3 qualification and 15% with a degree.
Milburn said:
“I do not accept the caricature of a generation that is not interested in employment. I do not accept that mental health is simply an excuse. Nor do I accept that the answer is to tell young people who are struggling simply to try harder. These are myths. Sometimes cruel ones. Young people are not to blame. Institutions that should have provided opportunities to them are the ones that have failed.”
Young people attempting to work are often hit by “applications disappearing into a void, interviews followed by silence, and recruitment processes that felt designed to deter rather than select”.
The report hlighted examples including a man in Newcastle who has applied for over 60 jobs without success, a woman in Camden who applied for around 50 roles over one summer, heard back from 10, and was rejected by all 10 without explanation, and a young man in Wrexham who applied to around 150 apprenticeships, but could not take up the one offer he received because it would have required him to move to Europe.
The report identified that the number of entry level jobs have fallen in particular.
“The first rung of the career ladder has thinned,” Milburn said. “For too many young people, it is now simply out of reach. That places them in a hopeless catch-22 where employers ask for work experience but the opportunities for young people to gain it have narrowed or gone.”
Recommendations
Alan Milburn will publish a final report later this year with recommendations.
Looking ahead to that, the report said:
“What is no longer credible is to do nothing and hope that economic growth alone will solve the problem. Growth will not absorb young people who have never worked, whose health prevents participation, whose anxiety levels are higher and whose career ladders have become harder to ascend.
“This review says: enough. Not another programme. Not another pilot. A system. Built around participation. Accountable for outcomes. Permanent in its architecture. With new ladders of opportunity. Funded at a level that treats young people as an investment, not a cost. Resilient to the problems of tomorrow, in a labour market which is likely at the beginning of yet another transformation. And worthy of the generation it is supposed to serve.
“A new mindset is needed. Our country can choose differently. One that prioritises the next generation. This review demands that it does.”
Keir Starmer: ‘Sobering’
Prime minister Keir Starmer described the report as “sobering”, and said he would take action. He told broadcasters:
“This is a longstanding, long-term problem. It’s been going on for many years, it’s complicated and complex. As Alan Milburn makes clear, there’s no single thing that you can say that’s the reason.”
Starmer said the government has already introduced grants for employers that employ young people who have been unemployed for six months, and those without a job or training for 18 months will be guaranteed six months of work or training.
“So some of those measures are in place. We clearly need to [do] more. This is, you know, I think a real sobering report, and we cannot afford – we will not allow – a lost generation, and so we’ll work with Alan now on what more needs to be done.”
Business reaction to Alan Milburn’s ‘Young people and work’ interim report
Tina McKenzie, policy chair of the Federation of Small Businesses:
“It is welcome to see growing recognition that too many young people are being left stranded between education and work. There are huge numbers who want to graft, train, start a business and build careers, but too often the opportunities simply are not there for them to get started.
“It is also right that health policy should factor in what ill-health means for a young person’s ability to work. We should treat the condition and consider the knock on effects on confidence, routine and future prospects. For many young people, work is as much a part of recovery and stability as any clinical intervention. Health policy designed with that in mind will do more good for more people.
“But ministers cannot ignore the impact soaring employment costs are having on hiring. Employment costs are a major factor when it comes to the number of NEETs – which is a shame, because small firms want to back the next generation. However, good intentions alone don’t create entry level jobs when they physically cannot afford the wage bill. This is particularly prevalent in hospitality and retail, sectors where young people would traditionally get their first taste of work.
“New research shows that 30 per cent of small business employers have recruited fewer workers as a result of the National Living Wage and National Minimum Wage increases in April. Similarly, more small businesses are now planning to cut staffing levels (21%) than increase it (8%), while 23% reduced headcount in the last three months compared to just 8% increasing it.
“There also needs to be a far stronger focus on investing in work itself. Too often, far more public money goes into managing economic inactivity than helping smaller firms create the jobs, placements and opportunities that stop young people falling out of work in the first place.
“If the government continues to raise employment costs and tighten regulations, it will be those already furthest from the labour market who lose out on vital opportunities. That’s why, at the Autumn Budget, the Employment Allowance must rise, so small firms are not priced out of creating the very jobs and apprenticeships ministers say they want to see more of.
“Government schemes cannot just become a rebate for hiring that large employers were already planning to do. Incentives and paid placements should be ringfenced for small firms, where young people are most likely to get a first chance.
“But this also needs to go further than employment alone. Young people are hugely entrepreneurial and often overlooked in these debates. FSB research found that almost three in five young people either own, or are interested in owning, a business, while 28% already run a side hustle. We should be capitalising on that. We should be building enterprise skills earlier, improving careers advice around self-employment, and creating clearer pathways for young entrepreneurs from all backgrounds.
“The government should also triple the Trading Allowance and rebrand it as a ‘Side Hustle Allowance’ to help more young people turn extra income into sustainable businesses. The allowance has been frozen for more than eight years despite the huge rise in young people starting side hustles and exploring self-employment.”
Shevaun Haviland, director general of the British Chambers of Commerce:
“The Milburn report must be a wakeup call for policymakers about the crisis of young people not in employment, education and training.
“Unless urgent comprehensive action is taken a whole generation is at risk of being cut loose from society, and economic growth will be hampered.
“Today’s report accurately diagnoses the problem, with suggested solutions to come later in the year. The issues identified in the Milburn Review have long been reported by businesses. It is important that government urgently takes steps to address these.
“BCC research shows that more than half of businesses are facing skills shortages, but high employment costs are causing many to cut back on recruitment and training.
“Both young people and employers often see risk as a barrier to taking a chance on a job or on someone with less experience. We welcome the Jobs Guarantee which will reduce this fear factor on both sides.
“Now, government needs to take even bolder action to tackle those at risk before they become NEET. That means earlier and better careers education; more training routes at Level 2; and reducing costs for employers.
“Businesses are keen to engage with the Milburn Review and with government in the coming months as solutions to these critical issues are developed. For example, Chambers are already bringing businesses to the table through Local Skills Improvement Plans, to match up training with the real jobs available to young people. The LSIP structure can be a ready-made part of the solution to these problems.
“It is welcome to see the Milburn Review recognise the “overwhelming desire” of most businesses to employ young people from their local area.
“Without strong business input, the government risks settling on interventions that fail to tackle the NEETs crisis in a meaningful way.
“An ambitious approach is needed between health, education, the welfare system, and employers. Solutions need to be locally rooted but nationally joined up.”
Lizzie Crowley, senior skills adviser at the CIPD:
“Young people are desperate for an opportunity to prove themselves, but many are struggling to navigate a labour market where entry-level opportunities, work experience and structured progression routes have become harder to access.
“Today’s Milburn Review findings and ONS figures highlight that much bolder action is needed to support youth employment given the collapse in the number of apprenticeships for 16-24 year olds and the general reduction in entry level roles.
“With more than one million young people not in education, employment or training there’s a strong case to introduce an Apprenticeship Guarantee for all 16-24 year olds. CIPD research shows that nine in 10 employers would support this and half say they would provide additional apprenticeship places over their existing provision if this were introduced. This would need backing from the UK Government and at regional and sector level. Without this level of ambition, there’s a real risk of a lost generation of young people.”
“The review’s findings reflect long-standing concerns about the mismatch between the skills employers need and those the education system is delivering.
“It’s been clear for some time that greater investment is needed in high-quality vocational and technical pathways, as well as stronger employer engagement in course design, and a joined-up workforce strategy linked to labour market demand and regulation.
“While there needs to be a significant focus on improving apprenticeships and other vocational routes into work, the government must also recognise the link between new measures in the Employment Rights Act 2025 and employers’ ability to invest in skill development and jobs for young people. For example, changes to the unfair dismissal qualifying period are likely to make employers more cautious about taking on young people whose potential is untested and could make it harder for firms to extend probation periods if new starters need more time to improve.
“It’s also important that proposed new requirements for minimum guaranteed hours for zero hours workers don’t discourage employers from providing these roles given they enable young people to balance studying while working. It’s crucial the government is in listening mode and is prepared to compromise on these measures before they are finalised in secondary legislation to ensure they don’t further restrict employment opportunities for young people.”
Karim Fatehi OBE, CEO of the London Chamber of Commerce and Industry:
“Alan Milburn’s review highlights a growing risk to London’s economy and the UK’s wider growth ambitions. Businesses across the capital continue to face significant labour and skills shortages, and with nearly one million young people nationally not in education, employment or training, the gap between available talent and employer demand is becoming increasingly damaging for productivity, investment and economic growth.
“Skills shortages remain one of the biggest concerns raised by London businesses. Firms across multiple sectors are struggling to recruit and retain staff, restricting their ability to grow, invest and compete internationally. At a time when businesses are also facing rising employment costs and continued economic uncertainty, the decline in entry-level jobs, apprenticeships and work experience opportunities highlighted in this report is deeply concerning.
“The finding that almost 60% of economically inactive young people have never had a job demonstrates the scale of the challenge, yet many employers, particularly SMEs, are finding it increasingly difficult to provide opportunities for young people under current economic conditions.
“LCCI has consistently called for greater flexibility in the Apprenticeship Levy to allow employers to invest in pre-apprenticeship training, shorter skills programmes and upskilling.
“We also support long-term investment in employer-led Local Skills Improvement Plans (LSIPs), to ensure training provision is better aligned with the needs of businesses and local labour markets. Crucially, the Milburn Review’s recommendations must now be matched by a clear and meaningful commitment from government to reduce the cost of hiring, with the Department for Business and Trade playing a central role alongside the Department for Work and Pensions in delivering practical solutions.”