Employers across Great Britain will receive £3,000 for every long-term unemployed young person they hire under a government scheme designed to cut the welfare bill and tackle a deepening youth jobs crisis.
The grant, available to firms in England, Scotland and Wales from Tuesday, is aimed at helping 60,000 people aged 18–24 who have been out of work and claiming Universal Credit for at least six months. It forms part of a wider “Youth Guarantee” initiative backed by £820 million in government funding, which promises every eligible young person a pathway into education, training or employment.
The Prime Minister, Sir Keir Starmer, and the Work and Pensions Secretary, Pat McFadden, are due to host a roundtable at Downing Street on Monday with hospitality businesses that have already signed up to the scheme. The first employer to back it is Merlin Entertainments, which owns Legoland Windsor, Chessington World of Adventures, Alton Towers and London’s Sea Life Aquarium. Merlin has pledged to create 300 jobs for young people over the next three years, building on existing programmes such as the “Merlin Illuminate” initiative for care leavers.
One in eight young people now classed as Neet
The scale of the crisis the government is trying to address was laid bare in a recent report by the former Labour minister Alan Milburn. It found that about one million 16- to 24-year-olds in the UK — roughly one in eight — are not in employment, education or training (Neet). That figure has risen sharply, with some estimates suggesting an increase of 259,000 between 2021 and 2024 alone, and projections that without urgent action it could reach 1.25 million by the early 2030s.
A decade ago Britain’s Neet rate was close to the European Union average. By 2025 only Romania had a higher rate. The UK’s youth unemployment rate for 16- to 24-year-olds climbed from 10.8% in 2022 to 15.8% in 2025, the steepest increase among G7 economies. Increasingly, young people are becoming economically inactive — out of work and not looking for it — often because of anxiety, depression and other mental health problems.
The economic toll is severe. Milburn’s report calculated that youth unemployment is costing Britain more than £125 billion a year, taking into account lost tax revenues, higher health and welfare spending, and damage to wellbeing. The lifetime cost to the exchequer for each 18- to 24-year-old who is Neet is estimated at £29,000 a year, potentially amounting to a loss of £52,000 over their working life for every year spent outside work, education or training.
Regional disparities are stark. In Barnet, north London, only 1% of 16- and 17-year-olds are Neet. In Dudley, in the West Midlands, the figure is 21.5%. Eight of the ten English local authorities with the highest proportion of Neet young people are in the North or the Midlands. Coastal and post-industrial towns often have jobless rates double the national average.
The causes are structural rather than behavioural, according to the Milburn review and many experts. The decline of the Saturday job, falling apprenticeship starts, skills mismatches between education and the labour market, and the impact of artificial intelligence on entry-level graduate roles have all been identified. At the same time, government policies have made it more expensive for businesses to hire young people. The minimum wage for 18- to 20-year-olds rose by 16.3% in April 2025, and employer National Insurance contributions increased from 13.8% to 15%. Job vacancies have fallen by 20% over the past 18 months, and business groups such as the British Chambers of Commerce have told MPs that rising labour costs put young people “at the back of the queue” for recruitment. The chief executive of Next, Simon Wolfson, has warned that the combination of higher NICs and a higher minimum wage has made it harder to take on younger staff.
Sir Keir Starmer said the government was “turning the page” on a status quo that held young people back. “We are putting in place the building blocks of real reform to expand opportunity for young people and helping them into work,” he said. “This is the foundation for a new contract with the next generation, so every young person has a clear path into learning or earning.”
The £3,000 grant is separate from the existing Jobs Guarantee scheme, which entitles 18- to 24-year-olds who have been on Universal Credit and looking for work for 18 months to a fully funded, six-month paid job. The government funds 100% of employment costs for up to 25 hours a week at the relevant minimum wage, alongside tailored support. That scheme has been expanded to include 22- to 24-year-olds and is being rolled out nationally in 25 areas this year, after pilots in Birmingham and Solihull, Greater Manchester, East Midlands, Hertfordshire and Essex, Central and East Scotland, and Southwest and Southeast Wales.
Pat McFadden said the new grant was designed to back employers “large and small” to take a chance on young people “who are ready to work and need that first step on the ladder”. He added: “Young people want the chance to work, earn, learn and build a better future.”
Andy Burnham, the newly elected Labour MP for Makerfield who is widely expected to become the next prime minister, has welcomed the Milburn report and vowed to take a more devolved approach to employment and welfare. “We’ve all got to be concerned with getting the welfare bill down,” he said last month. “I don’t think there’s any debate about that, to be honest, it’s how you do it.”
Union says government must go further
Paul Nowak, general secretary of the Trades Union Congress, described the £3,000 grant as “an important step forward to help tackle the number of young people stuck out of work”. But he warned that the scale of the crisis demanded faster and more ambitious action. “That means putting the turbo boosters on the jobs guarantee scheme to ensure it’s more widely available and available sooner to those who need it,” he said.
Nowak also called on the government to scrap lower minimum wage rates for young people and to ensure every apprenticeship offers genuine opportunities to learn and earn. The TUC has long argued for an “ambitious” national jobs guarantee, and Nowak stressed that increased investment was essential — but not enough on its own. The government’s approach has been criticised by some as a “scattergun” response, although ministers defend it as consistent cross-government action. The Institute for Fiscal Studies has warned that the £3,000 grant risks displacing older workers and may not do enough to address the mental ill-health that keeps many young people out of work.
Alan Milburn, whose final report with a full blueprint for reform is expected later this year, has described the record on youth unemployment as a “record of failure”. He has emphasised that the issues are structural, rooted in inequality, geography and poor health, and cannot be solved by a single grant alone. The government insists the £3,000 incentive is just one part of a wider effort to build “a new contract with the next generation”.
