The UK has emerged as one of the worst countries in Europe for the proportion of young people who are economically inactive, new findings confirm.
With nearly 900,000 people not in work or education (NEET), the UK’s rate has hit its highest point in over a decade, according to the Resolution Foundation’s latest report.
There are several possible reasons for the scale of the UK’s ongoing youth jobs issue, as well as the hiring crisis more broadly, including insights from forecasting groups that the UK will “flirt with recession” this summer, with nearly 250,000 more people projected to lose their jobs by mid-2027.
Employment Hero’s March Jobs Report data sheds further light on those constraints. According to the figures, part-time and casual roles contracted in early 2025 as SMEs pivoted toward full-time hiring to manage rising employment costs. It means the flexible, entry-level positions young people have historically relied on to get a first foothold in work are becoming harder to find – a pattern the British Chambers of Commerce has described to MPs as putting young people “at the back of the queue when employers consider recruitment.”
How Much of the UK’s NEET Rise Is Down to the Economy?
The Resolution Foundation is clear that the state of the economy accounts for around half of the post-pandemic rise in the NEET rate. Young people are typically last into the labour market and first out when cuts are made. But the actual increase since 2019 – 2.8% – is almost double what the wider unemployment picture alone would predict.
Labour market reforms would be a natural guess: changes to employer NICs, larger minimum wage increases for younger workers, and the Employment Rights Act are all considered to have an impact on youth unemployment. But the report is sceptical, because it’s inactivity, not joblessness, that has risen. In fact, the report finds these policy changes “unconvincing as a first-order explanation.”
Does Youth Mental Health Explain the UK’s High NEET Rate?
Mental health is a significant part of the picture too. The same Resolution Foundation report shows the UK has the highest rates of anxiety disorders (24%) and depressive disorders (12%) among 15-to-24-year-olds across the entire OECD, roughly double the average.
For hundreds of thousands of those young people, poor mental health is the direct reason they are not in work or study.
Why Does the Netherlands Have a Lower NEET Rate Despite Similar Mental Health?
But there are nuances within the findings. Namely, that countries facing similar mental health pressures are managing both their jobs markets and their NEET rates considerably better. When researchers plotted youth mental health prevalence across all OECD countries against each country’s NEET rate, the expected relationship wasn’t there. For depressive disorders, there is no association in either direction. For anxiety disorders, there is a weak association – accounting for only 7% of the variation in NEET rates across countries – and, as the report puts it, “the slope is negative”: countries with a higher prevalence of anxiety disorders among young people tend to have lower NEET rates than those with less.
The Netherlands illustrates the point. Dutch young people rank second in the world for depressive symptoms, directly behind the UK, and report anxiety disorders at rates only slightly below Britain’s, yet the Netherlands’ NEET rate is 4.6% compared to the UK’s 15.3%. If the UK matched the Dutch figure, there would be over 600,000 more young people in work or education today.
UK vs Netherlands: The Vocational Education Gap Driving the NEET Difference
So, what accounts for the gap? The report points to low participation in vocational education. In 2024, 43% of UK 18-to-24-year-olds were in some form of education. In the Netherlands, it was 67%. But England already sends 45% of young people to university, according to Department for Education data, meaning the shortfall is almost entirely in vocational routes. Only 22% of UK 18-to-21-year-olds are enrolled in vocational courses, against 35% in the Netherlands, Germany and Denmark. In the Netherlands, 51% of young people combine education and paid work at the same time. In the UK, 17% do.
There are signs, however, that when vocational routes are available and well-paid, young people tend to take them. Employment Hero’s data from over 500 UK construction businesses shows Gen Z employment in the sector rose 16.8% year-on-year in January – three times faster than any other age group – as wages in construction grew 9.6%.
Commenting on the figures, Kevin Fitzgerald, UK Managing Director at Employment Hero, said: “Young people are choosing the trades. The opportunity now is to train and retain them.” The question is whether government policy is building that opportunity at the scale the NEET figures demand.
Can the Government’s £1 Billion Youth Jobs Package Fix the UK NEET Rate?
The Government has responded with some remedies, including a £1 billion package comprising a £3,000 Youth Jobs Grant, a Jobs Guarantee scheme and expanded foundation apprenticeships, designed to bring more young people into work.
But the Institute for Fiscal Studies estimates that even under optimistic assumptions, the measures would shift the NEET rate from 12.8% to 12.1% – still higher than before the pandemic. The British Chambers of Commerce has warned separately that rising employer NIC costs and minimum wage increases have already put young people “at the back of the queue when employers consider recruitment” – something the grants do not address.
That’s a concern considering the disproportionate impact of these costs on small businesses, which have historically been the most likely employers of young people. Whether the NEET rate falls will depend on a range of factors, but not least on whether SMEs are afforded the right conditions to keep hiring them.
Is the Employment Rights Act Raising Youth Unemployment and NEET Rates?
The Employment Rights Act, of course, compounds many of those pressures. Four major trade bodies – the British Retail Consortium, Food and Drink Federation, REC and UK Hospitality – have jointly warned that the ERA’s guaranteed hours provisions risk a “double whammy of increasing unemployment and fewer young people entering the labour market.”
For SMEs, the stakes of getting this wrong are highest. And Employment Hero’s survey of 1,047 UK business owners found that one in five small businesses already intend to use more contractors and temporary staff as a direct result of the reforms. Employment Hero’s March Jobs Report also indicates there are early signs that Gen-Z is beginning to see employment growth in other sectors, namely science and tech-related roles.
Speaking in March, Alan Milburn – commissioned by the government to lead an independent review of youth inactivity – said he was “horrified” to find that 45% of 24-year-old NEETs have never held a job at all.
Milburn’s full recommendations are due in September, as part of the Government’s broader Get Britain Working agenda – a package that also includes the rollout of new youth guarantee trailblazers across eight mayoral regions and a reformed Jobcentre network.
The question they will need to answer is why countries facing similar pressures have managed to keep so many more of their young people working, and what it would take to build something comparable in the UK.
