More than 80 of Britain’s biggest high street names have warned the Prime Minister that government taxes and red tape are “pricing out” firms from hiring young people, as official figures show the number of 16- to 24-year-olds not in work, education or training has topped one million for the first time since 2013.
In a letter co-ordinated by the British Retail Consortium (BRC), the chief executives of Tesco, Sainsbury’s, John Lewis, Amazon, Marks & Spencer, Greggs, Asda, Morrisons and Primark told Downing Street that policy decisions are “making it harder to hire young people” and that the “ladder of opportunity for young people is wobbling” under the weight of rising employment costs and increasingly complicated regulations. Retail and its supply chain account for almost a quarter of all youth employment, the BRC noted, making the sector a critical entry point for those with few qualifications or limited experience.
The policy concerns
The bosses specifically called for a revisit of three areas: national insurance contributions, changes to the national living wage and the government’s new employment rights regime. They argue that these policies are driving up the cost of creating entry-level jobs just when those jobs are needed most.
Employer national insurance contributions rose sharply from April 2025, when the rate increased from 13.8 per cent to 15 per cent and the secondary threshold – the earnings level at which employers start paying – was reduced. For the current 2025/26 tax year the threshold stands at £417 per month. While exemptions exist for under-21s and apprentices under 25 – employer NIC is zero on earnings up to £4,189 a month for those groups – the overall increase in the rate and the lower threshold mean businesses face a bigger bill for most of their workforce. From April 2026, the rate for Class 1A and 1B NICs on expenses and benefits will remain at 15 per cent.
The national living wage and national minimum wage have also been pushed higher. From 1 April 2026 the NLW for workers aged 21 and over rose to £12.71 an hour, a 4.1 per cent increase. For 18- to 20-year-olds the minimum wage jumped to £10.85 an hour – an 8.5 per cent rise – while 16- and 17-year-olds and apprentices now receive at least £8.00 an hour, up 6 per cent. The government has said it intends to phase out age bands over time and move towards a single adult wage rate, a move retailers fear will further increase the cost of employing younger staff. By comparison, the independently calculated “real Living Wage” set by the Living Wage Foundation stands at £13.45 across the UK and £14.80 in London, underlining how far the statutory rates have climbed.
On employment rights, the letter points to new changes in the Employment Rights Act that bosses say make workforce management more complicated. Young workers under 18 already have specific protections, including a maximum eight-hour day and 40-hour week, a 30-minute break for shifts over 4.5 hours, and a ban on working between midnight and 4am. Retail leaders argue that the cumulative effect of these regulations, on top of rising wage bills and higher NICs, is deterring businesses from offering the flexible, entry-level roles that have traditionally been a first step into the labour market.
“The message from retail is clear: if Government is serious about tackling youth unemployment, it cannot keep making it more expensive to create jobs,” said Helen Dickinson, chief executive of the BRC. “This first step on the ladder is cracking under the weight of Government-imposed costs and regulations. Youth unemployment is a challenge that Government and business must tackle together.”
The NEET crisis
The warning comes a fortnight after the Office for National Statistics confirmed that the number of 16- to 24-year-olds not in employment, education or training – known as Neets – rose to 1.01 million in the three months from January to March, the first time the figure has exceeded one million since 2013. Alan Milburn, who is leading the government’s review of the problem, has warned that the total could surpass 1.25 million within five years. His interim report described the situation as a “record of failure” and cautioned against a “lost generation”.
Milburn’s review has identified structural causes behind the rise: rising employment costs, a long-term decline in Saturday jobs, and a significant increase in young people who are Neet because of ill health, particularly mental health conditions. Health issues, including disability, are now a central barrier to workforce participation for many young people. The economic cost of youth unemployment is estimated at more than £125 billion a year.
Last week the government appointed former Marks & Spencer chief executive Marc Bolland as Lead Non-Executive Director at the Department for Work and Pensions. Bolland, who previously founded the charity Movement to Work – which has helped more than 200,000 disadvantaged young people into employment – will convene business leaders to help drive the delivery of government initiatives.
Government response
A Government spokesman said ministers are “already working in partnership with businesses to tackle youth unemployment and create 50,000 more opportunities for young people” as part of a £2.5 billion youth employment support package. The package includes a Youth Guarantee that aims to ensure every young person has access to further learning, a job or an apprenticeship. Specific measures include a Jobs Guarantee providing six months of paid work for eligible 18- to 24-year-olds who have been on Universal Credit for 18 months, and a £3,000 Youth Jobs Grant to employers for each young person they hire who has been on Universal Credit for six months.
“From this month, we’re rolling out £3,000 payments, covering wages for six months for those out of work long-term, and cutting hiring costs for under‑21s and apprentices,” the spokesman said. “We will continue working with businesses to address the challenges set out in the Milburn report and help more young people take their first step into work.” The government has also introduced apprenticeship incentives worth £2,000 for small and medium-sized enterprises taking on apprentices aged 16 to 24, and youth hubs offering employability coaching and CV support.
The retail sector, which has already shed 400,000 jobs over the past decade, argues that these support schemes, while welcome, do not address the fundamental problem of rising employment costs embedded in the tax and wage system. The bosses’ letter concludes that without changes to national insurance, the national living wage trajectory and the new employment rights framework, the very entry-level roles that provide a first rung on the career ladder will continue to shrink, leaving more young people locked out of the workforce entirely.
