Youth worklessness costs Britain £125bn annually, according to a landmark government-backed review that warns the country is sleepwalking into a “lost generation” of young people. The figure – exceeding what the nation spends on education each year – represents the cumulative cost of more than one million 16- to 24-year-olds who are not in education, employment or training (Neet). The report, led by former Labour cabinet minister Alan Milburn, describes the situation as a “financial black hole” that threatens both the economy and the public finances.
The £125bn price tag
The Milburn review calculates the annual burden by totalling the lost economic contribution from young people outside the labour market, the cost of supporting them through the benefits system, and the knock-on effects on health services. If every Neet 18- to 24-year-old had been in work last year, it would have added £38bn to UK gross domestic product. Separate analysis by the charity Impetus, cited in the research, estimates that the post-pandemic surge in Neet levels has already cost the economy £20bn in lost output.
A young person who experiences a period out of work, education or training between the ages of 18 and 24 loses on average £52,000 in lifetime earnings per year they are Neet. For those who have never had a job, the lifetime loss can reach £300,000. The report also warns of long-term “scarring effects”: research using the 1970 British Cohort Study shows that prolonged Neet spells in early adulthood lead to worse employment outcomes, lower financial security and poorer health well into midlife, with a clear “dose-response” relationship – the longer a young person is Neet, the worse their later prospects.
The public finance impact is equally stark. The government spends around £8.1bn a year on benefits directly for young people through the welfare system, of which more than half – £4.4bn – goes to Neets. This includes £3.2bn on disability benefits paid through personal independence payments, available to those both in and out of work. Milburn estimates that £3.2bn of that total could have been avoided if Neet young people had been in work and earning above the relevant earnings thresholds. The average lifetime cost to the public purse from a single young person being Neet between 18 and 24 is £29,000.
The Neet figure itself has risen sharply. Official data from the Office for National Statistics for the three months to March 2026 shows 1,012,000 16- to 24-year-olds in the UK are now Neet – the first time the mark has been breached since 2013. The proportion of young people who are Neet has been climbing since 2021 and is close to its highest point since 2014. The youth unemployment rate for 18- to 24-year-olds now stands at 14.7 per cent, the highest since November 2014. Without intervention, the number could rise to 1.25 million within five years, leaving one in six young people disconnected from work or learning.
A system in need of repair
Milburn’s review diagnoses a “whole system failure”. It points to schools, the health service, the welfare state and the labour market as institutions that are “no longer fit for purpose” in guiding young people into adult working life. Six out of ten young people who are Neet have never had a job – up from four in ten in 2005. Young people cite a lack of work experience, anxiety and a scarcity of local jobs as the main barriers. Ill health, especially mental health conditions such as anxiety and depression, is increasingly the reason given for being out of work or education. The likelihood of a young person with a work-limiting health condition being Neet is significantly higher.
The report also criticises the welfare state for “exacerbating inactivity”, arguing that it too often steers young people towards benefits rather than employment. Milburn warns that new work programmes alone will not fix deeper-rooted problems, and calls for a fundamental reset of policy covering schools, health and welfare. External factors – including the pandemic, social media, smartphones and the economic downturn linked to the Iran war – are acknowledged as contributors to the crisis. Businesses have warned that rising taxes and a weakening economy are making it harder to hire young people.
The government has already announced a £1bn investment through its Youth Guarantee, designed to ensure 18- to 24-year-olds can access further learning, job opportunities or apprenticeships. This includes a Jobs Guarantee offering six months of paid work and a Youth Jobs Grant of £3,000 to employers who hire eligible young people. Youth Hubs are being expanded to more than 360 locations nationwide, packaging employment support with CV advice, careers guidance, skills training and mental health services. A range of charitable organisations, including UK Youth and Movement to Work, are also running programmes focused on employability skills and confidence-building.
But any attempt at broader welfare reform remains politically fraught. Keir Starmer’s government performed a chaotic U-turn on benefits last year, particularly over changes to Personal Independence Payments and Universal Credit, after warnings that cuts would drive up poverty during the cost-of-living crisis. Milburn’s report acknowledges that the challenge is not simply about affordability. “The question is no longer whether the current position is affordable,” it states. “It is whether it is sustainable.” The longer a young person remains outside work or learning, the review warns, “the harder and more expensive it becomes to help them back”.
