Alan Milburn’s anticipated interim report into Young People and Work suggests systemic failure is to blame for the escalating unemployment crisis facing young people in the UK.
Released on Thursday afternoon, the independent report, commissioned by Work and Pensions Secretary Pat McFadden, laid bare the scale of the crisis, finding that by the end of 2025, nearly one million young people (957,000) in the UK weren’t in education, employment or training (NEET), an issue that has hit small and medium-sized enterprises (SMEs) particularly hard.
How Rising UK Hiring Costs Are Deepening the NEET Crisis
Despite evidence from over 300 young people showing 84% want to work, the issues at the heart of this crisis are numerous. In addition to the demand side of the problem, hiring costs are also adding complexity to the hiring landscape.
As Milburn stresses in the interim report: “When the cost of entry-level labour rises, the case for taking on someone inexperienced becomes harder unless employers are given support to offset the risk.”
From the perspective of SME employers, which make up 60% of employers in the UK, barriers to absorbing young people into previously accessible entry-level roles have been compounded by a wave of new employment legislation that has made hiring much more costly.
New YouGov research commissioned by Employment Hero found that the cost of employment in the UK has risen by 9.6% in the past year alone. More than three-quarters of firms (78%) say that changes in employment have affected their ability to grow, and nearly one in five SMEs (19%) say that new employment laws significantly discourage them from hiring. Over half (53%) say they’re worried about unintentionally breaching those laws – a concern that’s feeding directly into decisions about whether and when to take on staff.
The same research found that 56% of businesses believe employing staff has become more complex over the past year. When asked to rate that complexity out of 10, respondents gave an average score of 4.7 three years ago – today it stands at 6.2, a 32% increase.
Separately, the British Retail Consortium has calculated that the cost of employing a part-time entry-level worker rose by more than 13% in 2025 alone – a figure that goes some way to explaining why the flexible, low-hours roles that young people have historically relied on as a first foothold aren’t being created. Across the full employment cycle, Employment Hero’s YouGov polling shows more than half of UK firms (51%) report increases in HR administration, payroll processing and recruitment costs over the same period.
Why Entry-Level Jobs Are No Longer Absorbing Young People
The Milburn review largely provides structural critique of how Britain’s institutions – health, education, welfare, employment services – have failed to work together. With the Office for National Statistics recently showing youth unemployment currently running at a five-year high of 16% with 713,000 people aged 16 to 24 out of work, vacancy levels for entry-level roles have dropped sharply since 2024.
Kevin Fitzgerald, UK Managing Director at Employment Hero, has observed the effect of this slowdown in hiring in real time, stressing that “small businesses are the engine room of the UK economy, but too many are now being asked to grow with one hand tied behind their back”.
“We hear from employers every day who want to do the right thing by their people as well as grow and contribute to the economy, but they need clearer support and better tools to keep pace with change. The concern is that good businesses delay hiring, pause investment or stay smaller than they want to because employment has started to feel too difficult. That is bad for businesses, bad for workers and bad for growth,” he adds.
Where Opportunities Lie for Young People
The Government’s expansion of apprenticeship opportunities is one area that could help to alleviate pressure for employers and young people alike, especially when it comes to skills gaps. Research from Employment Hero highlights that 46% of SMEs value apprenticeships and degrees equally.
But while 73% of SMEs want to embrace the Government’s apprenticeship push, 43% said that navigating the apprenticeship system is complex, which could impact hiring decisions.
Although the interim report acknowledges the Government’s Youth Guarantee and investment in Pathways to Work and the Right to Try are helpful, it points out that “the scale and complexity of the challenge requires a broader and more integrated response” that “bridges education, skills, health, employment, and welfare systems and draws on both public and private sector innovation.”
Writing for Employment Hero, Kevin Fitzgerald said: “If apprenticeships are to deliver real value, SMEs need them to be straightforward to onboard, support, and develop apprentices without being buried in admin.”
What Comes Next for UK Employers and Young People
Today’s report is interim, with a final report setting out specific policy recommendations expected to follow this year. In the meantime, the trade bodies that have been making the employer case for change – the BRC, the British Chambers of Commerce, UK Hospitality and others – are likely to push harder for a reduction in employer NICs for under-25s, better-funded vocational pathways and a more measured rollout of the Employment Rights Act.
The review puts the annual cost of youth inactivity at £125 billion a year in lost output, reduced tax revenue and increased public service demand. For every year the institutional architecture isn’t rebuilt and the employer environment isn’t addressed, that number, and those hiring anxieties, could keep on rising.
