Youth unemployment hits 11-year high as rate cut expectations build

"Youth unemployment has surged to its highest level in more than a decade, raising fears of a "lost generation" and intensifying expectations that the Bank of England will cut interest rates next month. Figures from the Office for National Statistics show that in the three months to December 2025, the unemployment rate among 16 to 24-year-olds climbed to 16.1 per cent. That equates to nearly 740,000 young people out of work, an increase of around 120,000 in under a year."

"In the first quarter of 2024, before the implementation of higher employer national insurance contributions and minimum wage rises, the youth unemployment rate stood at 14.2 per cent, or roughly 620,000 people. The rise means young people account for nearly half of the total increase in unemployment across the economy over the same period, despite representing just 13 per cent of the working-age population."

"Economists warn that while spikes in youth joblessness were seen during the 2008 financial crisis and the Covid-19 pandemic, the current rise is unusual because it has occurred without a comparable surge in unemployment among older age groups. Peter Dixon, senior economist at the National Institute of Economic and Social Research, said younger workers were being "priced out of the market". Louise Murphy of the Resolution Foundation noted that almost one in six young people who want to work cannot find a job."

Youth unemployment rose to 16.1% in the three months to December 2025, leaving nearly 740,000 16–24-year-olds unemployed, an increase of about 120,000 in under a year. In early 2024 the rate was 14.2% (around 620,000). Young people account for nearly half of the total rise in unemployment while comprising 13% of the working-age population. The increase is atypical because older age groups have not seen comparable job losses. Analysts link the rise to higher employer national insurance, compressed minimum wage age differentials and rising labour costs in hospitality, retail and leisure, with further pressure expected when Employment Rights Act provisions expand sick pay.

Read at Business Matters