Prolonged youth jobs crisis is set to cost UK economy almost £7 billion next year

• Youth unemployment will remain high after other areas of the economy begin to recover, warns a new report from Learning and Work Institute and The Prince’s Trust, supported by HSBC UK

• The economic cost of youth unemployment, in terms of lost national output, is forecast to rise to £6.9 billion in 2022

• The fiscal cost of youth unemployment, in the form of lower tax revenue and higher benefit spending, is forecast to be £2.9 billion in 2022

• The long-running scarring cost to young people entering the labour market in 2021, in terms of lost earnings and damage to employment prospects, is forecast to be £14.4 billion over the next seven years

A new report released today from The Prince’s Trust and the Learning and Work Institute warns that young people will increasingly bear the brunt of the unemployment crisis, at a growing cost to the UK economy.

The major study, supported by HSBC UK, shows how, while some areas of the economy might begin on the road to recovery, young workers are under-represented in these sectors, and the industries that typically employ young people will be hardest hit in the long term.

The report, based on new labour market analysis and surveys with employers and young people, also warns that the pandemic will continue to exacerbate pre-existing inequalities.

Key findings:

Long-lasting damage from youth unemployment:

New economic forecasting reveals that, while young people’s employment has been worst affected by the pandemic with under 25s accounting for three in five jobs lost, youth unemployment is due to climb further still, even as the economy recovers.

The outlook for young people’s employment is worse compared to the outlook for older workers. In addition to being over-represented in the sectors hit hardest by the pandemic to date, young people tend to be over-represented in the sectors that are forecast to see lower employment in the long term and under-represented in occupations which are likely to see the strongest job growth.

This suggests that, in addition to the greater risk of unemployment for young people during the pandemic, the longer-term structural changes in the labour market are likely to reduce future employment opportunities for young people without support to improve skills for the jobs available.

For the first time, the report cautions of the financial hit to the economy of higher youth unemployment due to the pandemic:

• The economic cost of higher youth unemployment in terms of lost national output is forecast to be £5.9 billion in 2021, rising to £6.9 billion in 2022

• The fiscal cost of higher youth unemployment, in the form of lower tax revenue and higher benefit spending, is forecast to be £2.5 billion in 2021, rising to £2.9 billion in 2022

• The long-running scarring cost for young people entering the labour market in 2021 alone is forecast to be £14.4bn over the next seven years. This relates to the impact on employment and earnings they are likely to suffer for at least seven years, due to entering the labour market at a time of higher unemployment.

Pandemic exacerbating pre-existing inequalities:

The report finds disparities in the impact of the crisis on different groups of young people, raising concerns that the pandemic has, and will continue to, exacerbate pre-existing inequalities.

Analysis shows that the decline in working hours for young people with no qualifications (34%) has been five times higher than the decline for those with a degree level qualification (7%). Demand for employees with lower-level qualifications is projected to fall in the short, medium and long-term, raising concerns that the employment prospects of young people who lack higher level qualifications will be further negatively affected.

The report also finds the decline in hours worked for Black young people (49%) has been three times higher than for white young people (16%).

New data surveying UK employers finds two in five (41%) feel the pandemic will have a negative impact on young people’s prospects in their sector in five years’ time. A survey of young people finds one in four (26%) expect their employment prospects will still be impacted in five years’ time.

Stephen Evans, Chief Executive of Learning and Work Institute, said:

“Young people have been at forefront of the coronavirus jobs crisis. While we are hopefully slowly emerging from the worst of the pandemic, the legacy will be with us for years to come in the form of higher youth unemployment.

“This is not just bad for young people. It will have a huge hit on our economy and our public finances, and it risks a long-lasting scarring impact on those affected.

“If we are to tackle the looming youth jobs crisis, the Learning and Work Institute believes the Government must work with partners to urgently roll-out a ‘Youth Guarantee’ to support young people to access a job, an apprenticeship, education, or a high quality training opportunity.”

Jonathan Townsend, UK Chief Executive of The Prince’s Trust, said:

“This report is a stark warning of how the current economic crisis will have a scarring effect on young people, their earnings and prospects. We also know from 45 years’ experience of working with young people that youth joblessness can impact self-esteem and mental health for years to come, if we fail to act.

“Government, employers and charities must work together to ensure that the young people who need the most support are not forgotten. They need the opportunities to upskill, retrain and access job opportunities, or we risk harming not only our young people’s futures but the recovery of our economy.”

The Prince’s Trust helps young people to build confidence and skills for work, education and training. The employability courses offered by The Trust are run both in person and online and give young people the practical and financial support needed to stabilise their lives. The youth charity is working with employers to deliver the Government’s Kickstart scheme by providing quality employability support to young people on placements.

Ian Stuart, Chief Executive of HSBC UK, said:

“This research highlights the important role the private sector can play in ensuring young people have the opportunity to thrive in the UK’s recovery.

“It’s crucial that we back the job creators – the UK businesses of all sizes up and down to the country – to ensure they have the confidence to invest, grow and create the jobs of tomorrow, as well as help young people develop the skills and experience needed to step into these roles.

“Together with the Prince’s Trust, we’re proud to have helped more than 50,000 young people access skills-training and employment opportunities that will help them succeed going forward, including in key sectors such as digital and the green economy.”

The Prince’s Trust has helped one million young people across the UK since 1976 and focuses on supporting disadvantaged young people into jobs, education and training.