West Midlands NEETs could add £100m to the economy, according to PwC analysis

• NEET rate in the West Midlands improved from 14% in 2023 to 12% last year but remains higher than the national benchmark 

• Reducing the NEET figure in the West Midlands has the potential to add £100m to UK annual GDP

• Overall, UK GDP could be boosted by around £13-26 billion if regional disparities in the share of young people classed as NEET were reduced to align with the level of best performing region, Northern Ireland  

• Over three million young people are now economically inactive, up almost 20% in ten years, with one in eight young people not in education, employment or training (NEET), its highest level in a decade

West Midlands NEETs (not in education, employment or training) could potentially add £100m to the UK GDP if they were to join the labour force, according to analysis from PwC into the annual youth employment rate (16–24-year-olds). 

PwC UK’s Youth Employment Index tracks the progress of youth employment outcomes across the 38 OECD countries and regions in the UK, looking at metrics including labour market participation, quality of work and skills acquisition. Analysis shows that the West Midlands NEET levels decreased from 14% in 2023, to 12% last year.    

Northern Ireland is now the benchmark for reducing the share of young people who are NEET, with 9% of 16 to 24 years olds classed as NEET, while Scotland (16%) is at the other end of the scale. PwC analysis indicates that reducing regional disparities and getting more young people into employment under initiatives such as the government’s Youth Guarantee could boost GDP by around £13 billion to £26 billion if this gap to Northern Ireland was reduced.  

UK youth jobs market  

The UK’s youth jobs market performance has declined over the past year, dropping four places to 27th out of the 38 OECD economies, according to the analysis. The Index presents a number of recent lows in UK youth employment metrics , including, economic inactivity at its  worst levels in a decade, with one in eight now classed as NEET, and the share of new graduates in ‘graduate jobs’ at a ten-year low.  

The report finds that the three main drivers to the UK’s deteriorating performance are:    

• Cyclical pressures: The overall UK labour market has cooled. UK youth unemployment is now almost three percentage points higher than the OECD average, suggesting young workers are disproportionately impacted by the softening jobs market relative to older workers. While adult workers have seen consistent employment growth since 2012, employment among young workers in 2025 remain below 2019 levels. The youth-to-adult unemployment ratio is now at its highest level on record and the highest in the OECD. 

• Graduate employment lull: The overall share of recent graduates in ‘graduate jobs’ has fallen to its lowest level since 2014, indicating the labour market’s capacity to absorb new entrants is weakening. The number of graduates entering the jobs market continues to climb with 2024 marking the first year over one million students graduated from university. 

• Rising economic inactivity: A growing share of young people are becoming economically inactive, driven by a larger pool of students and an increase in long-term sickness. Three-times as many young people are inactive due to long-term sickness than 2005, with one quarter (26%) of young people reporting common mental health conditions in 2024, compared to 19% in 2014.

Little indication of AI impacting youth employment 

PwC’s Hope and Fears survey found nearly a third of entry-level workers say they’re worried about AI’s impact on their future. Across all sectors, the Index found no direct impact of AI on youth employment, with weaker business sentiment and softer labour demand being the main drivers for higher youth unemployment. 

However, analysing highly exposed sectors shows a potential impact emerging. The IT sector is the most exposed to AI adoption and typically has higher occupational churn, so could be an early indicator for wider trends. Youth employment in IT fell by one-fifth (20%) last year, in part due to a 14% fall in roles for new graduates, while adult employment has remained broadly stable. This could suggest that increased AI adoption has had some impact on entry-level roles at least in the short term. This trend, however, does not currently extend to other sectors. 

Longer term, young people are optimistic about AI impact. PwC’s Hope and Fears survey found Gen Z workers feel more excited about how AI will affect their careers over the next three years compared to Gen X - expecting to see an increase across productivity (67% vs 39%), salary (47% vs 18%), and job security (48% vs 16%).  

David Morris, Market Senior Partner, West Midlands, PwC UK said: 

"It’s encouraging to see the levels of NEET going in the right direction in the West Midlands. Progress is good but there is still significant potential to unlock. Getting our young people into the workforce must be a priority, and recent government announcements such as the Youth Guarantee should make a difference.  

“The region is home to a young and diverse population, more than the national average, and the challenge now is to ensure that the young people in our region are supported, skilled and aligned with future workforce needs. With issues like mental health noted as a key driver for NEET levels, creating environments where young people can thrive and adapt is imperative.

“The West Midlands is central to the economic ambitions of the UK, focused, purposeful and strategic efforts will be key to harnessing the untapped potential of our young workforce.”

Jake Finney, Senior Economist, PwC UK said: 

“The UK’s youth jobs market has deteriorated sharply. This is having large economic ramifications, as according to government estimates, lost output is costing businesses £85bn per year and £212bn per year in cost to the state, equivalent to 7% of GDP. It’s positive the Government has signaled a clear focus on tackling this challenge as without action, it is possible the situation could get worse rather than better: our survey of 4,000 UK adults showed one-in-ten workers are actively considering leaving work and younger workers particularly at risk. Meeting this challenge is increasingly urgent, but there are roadmaps. For example, if the UK had matched Australia’s improvements in youth employment since 2014, around 450,000 more young people would be in work today."