UK Has 735,000 Jobless Young People As Rate Hits Decade High

UK youth unemployment has surged to the highest in a decade as a jobs market slowdown falls hardest on those starting out in the labor market, piling fresh pressure on Prime Minister Keir Starmer's embattled Labour government.

The jobless rate for 16 to 24-year-olds climbed to 16% in the three months to October, the highest rate since early 2015, according to official data published Tuesday. The number of young people who were unemployed reached 735,000, having increased steadily since increases to employer payroll taxes and the minimum wage took effect earlier this year.

The figures partly reflect more young people moving out of inactivity to look for jobs, but they also show that many are struggling to find work, according to Stephen Evans, chief executive at Learning and Work Institute.

It will raise fresh questions over Chancellor of the Exchequer Rachel Reeves' decision in October last year to balance the books on the back of businesses with a £26 billion ($34.9 billion) increase in payroll taxes. With the economy barely growing since Labour came to power 17 months ago and unemployment rising, the party has plunged in opinion polls is expected to suffer losses in local elections in May where immigration will also be a key issue.

Businesses have cut 187,000 jobs since Labour's first budget in October 2024. More than 60% of that has come since April when the increase national insurance contributions came into effect along with a near-7% rise in the minimum wage.

The UK's overall unemployment rate hit 5.1%, the highest since the start of 2021. While firms were spared a repeat of the major tax hikes at last month's budget, they are still facing the prospect of another inflation-busting increase in the minimum wage next year and a strengthening of employment rights.

Hiring has particularly suffered in low-wage sectors relying on young people like retail and hospitality. Tax-based data published Tuesday showed retail, wholesale, accommodations and restaurants have combined shed almost 130,000 jobs over the past year. There are also signs that AI is replacing entry-level roles in white-collar sectors.

Yael Selfin, chief economist at KPMG UK, said the more dramatic surge in youth unemployment suggests young workers are "bearing the brunt of the slowdown in labour market activity." She added that the outlook for a recovery in hiring young workers remains bleak, especially with the National Living Wage for 18–21-year-olds set to rise by 8.5% in April 2026.

The large number of young people outside the jobs market, with almost 1 million not in education, employment or training, has become a key worry for policymakers. The Labour government has introduced a job-guarantee scheme for those aged 16 to 24, while Bank of England Deputy Governor Clare Lombardelli highlighted the issue in front of Parliament's Treasury Committee earlier this month.

"We need a twin approach of providing more help to find work and creating the conditions for employers to create jobs," said Evans at the Learning and Work Institute.

Source: Bloomberg Europe