£26bn GDP boost if ‘worst in a decade’ NEET levels reversed among young people

• According to PwC Youth Employment Index 2025(1), UK annual GDP could be boosted by up to £26 billion (2024 prices) if region-specific NEET (not in education, employment or training) levels aligned to Northern Ireland, which is the best performer across the UK

• Three million young people are now economically inactive, up almost 20% in ten years, with one in eight young people NEET, its highest level in a decade

• The UK dropped four places among OECD economies in the Index, as UK’s annual youth employment rate (16 to 24-year-olds) fell to a 10-year low and other peer countries showed improvement

• PwC analysis doesn’t find a statistically significant link between Artificial Intelligence (AI) adoption and higher UK youth unemployment but early signs of impact on entry-levels jobs in highly exposed sectors

The UK’s youth jobs (16 to 24-year-olds) declining market performance has meant it now ranks 27 out of the 38 OECD (Organisation for Economic Co-operation and Development) economies in PwC's 2025 Youth Employment Index(2). The Index tracks youth employment outcomes across OECD countries, looking at metrics including labour market participation, quality of work and skills acquisition. UK Youth unemployment rate now stands at 15% based on the latest data, up from 11% three years ago, recording the sharpest increase in the G7.

The findings come as the Government intensifies action to tackle rising levels of NEETS, including increased funding in the recent Budget to guarantee work placements for 18-21 year olds, and an independent investigation into tackling youth inactivity.

Youth Economic inactivity at decade high

The Index presents several recent lows in UK youth employment metrics - including the worst economic inactivity levels in a decade and one in eight now classed as NEET. Around three million young people are now economically inactive, a third (34%) higher than in 2005, representing the highest proportion of any working-age group. 

The report finds several main drivers to the UK’s deteriorating performance in the Index:  

• 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.

How can the trend be reversed? 

The Government has recently outlined a multi-faceted approach to tackling youth economic inactivity, including the Youth Guarantee, which ensures paid work placements for eligible out of work 18 to 21-year-olds, and free apprenticeship training for under-25s working at SMEs. An independent investigation into rising youth economic inactivity will also conclude in Spring 2026.

PwC's analysis highlights significant economic benefit from reducing NEET rates. Using Northern Ireland, the best performing region for reducing young people inactivity with only 9% of 16 to 24 years olds classed as NEET, as the benchmark, analysis showed substantial economic benefits. If regional disparities were reduced and worst performing regions such as London (15% NEET rate) and Scotland (16% NEET rate) progressed NEET levels towards Northern Ireland, it would boost GDP by around £13bn, and up to £26bn if the gap was fully closed.  

Marco Amitrano, Senior Partner, PwC UK said: 

"The Government is rightly focused on tackling the opportunity crisis facing young people. A generation’s future is at risk - as is the UK’s productivity and prosperity. Given the UK's sliding performance on youth employment, a serious gear change is needed. This will only come with joined up thinking across education, health and the economy. Above all, progress depends on growth - growth to support investment in skills, health, and job creation. The potential greater stability on the tax front following last week's Budget should help, but we also need a tangible programme for growth that business can get behind. No business wants to see young talent go to waste, which means we can generate a lot of momentum behind the ambition."

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 signalled 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.”

Phillippa O’Connor, Chief People Officer, PwC UK said:

“Reducing economic inactivity and tackling the NEET rate requires collaboration across business, government and communities. Our research shows this is one of the most urgent challenges facing individuals, business and government alike, with one in four young people considering leaving the workforce and mental health a key driver. The Keep Britain Working Review is an important step in exploring practical solutions, and as a Vanguard employer in the Review, PwC is proud to stand alongside partners to address this systemic challenge. We’re committed to sharing experiences and insights to help unlock workforce health, wellbeing and productivity – and to turn that insight into action.”

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%).  

Jake Finney, Senior Economist, PwC UK said:

“It is too early to tell the impact of AI. Highly exposed sectors like IT may be a ‘canary in the coalmines’ moment but our analysis shows no wider impact approaching in other sectors, yet. Young people disproportionately have jobs in low-AI risk sectors such as retail and hospitality, which will provide some shelter. With increasingly numbers of young graduates entering a rapidly changing labour market due to AI adoption, the challenge and opportunity for businesses will be how they develop this generation of talent to meet the demands of an evolving workplace.”

Asim Siddiqi, Technology Talent Leader at PwC UK said:

"There’s a lot of talk and anxiety about AI taking jobs, but I think the bigger risk is people feeling losing confidence in their place in the future. With the right investment in skills and inclusion, technology can open more doors than it closes. Helping young people build confidence with digital tools and technology is how we turn uncertainty into resilience and that’s what will really shape the UK’s future economy."

-Ends-

Notes to Editors: 

1. The PwC UK Youth Employment Index began in 2006 and tracks the progress of youth employment outcomes across the 38 OECD countries using a combination of indicators to gain a holistic view of labour market performance for young people, including looking at labour market participation, quality of work and skills acquisition.

1. The report includes UK data up to the third quarter of 2025, however, the international Index rankings are based on 2024 data, due to the availability of annual data from the OECD.   

1. PwC UK has joined more than 60 major and many small employers to work with the government to tackle the rising tide of ill-health that is pushing people out of work and holding back growth. The joint effort, developed through the Keep Britain Working Review, will drive action to prevent ill-health, support people to stay in work, and help employers build healthier, more resilient workplaces. PwC will be one of the Vanguards, early adopters who will develop and refine workplace health approaches over the next three years. Employers join forces with government to tackle ill-health and keep Britain working - GOV.UK 
    
    

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