UK Companies Struggle to Hire Young People as Costs Rise
British companies are finding it harder to hire young workers because of rising business costs. Business groups told Members of Parliament (MPs) that many companies cannot afford to recruit new staff, especially young people who have little work experience.
According to business leaders, companies have faced increasing costs for a long time. Higher wages, rising taxes, and other expenses have reduced company profits. Because of this, many businesses are delaying or reducing their hiring plans.
Business lobby groups said that young people are often the most affected when companies cut back on hiring. Employers are becoming more careful about who they recruit and prefer candidates with more experience and qualifications.
One of the main concerns raised by businesses is the increase in labour costs. The government recently raised the minimum wage and increased employer contributions to national insurance. These changes have made it more expensive for companies to hire workers.
Because of these higher costs, many businesses are choosing to hire fewer people. When they do recruit, they often prefer experienced workers who already have strong skills. This makes it harder for young people who are just starting their careers to find jobs.
Business groups also warned that new employment laws could make the situation worse. The Employment Rights Act is designed to improve worker protection, but some companies worry it may discourage them from hiring people with less experience.
Employers say hiring someone with limited skills or a short work history already involves some risk. If employment rules become stricter, businesses may become even more cautious and avoid hiring young workers.
The British Chambers of Commerce (BCC) said it expects unemployment in the UK to increase this year. The group predicts the unemployment rate could rise to about 5.5 percent. It also warned that young people would likely be affected the most.
Recent data from the Office for National Statistics shows that unemployment is already rising. In the three months ending in December, the unemployment rate was 5.2 percent. During this period, nearly 1.9 million people in the UK were unemployed.
Young people represent a large share of these numbers. Government data shows that about 957,000 people aged 16 to 24 were unemployed during the same period.
Kate Shoesmith, director of policy and insights at the BCC, said many companies are currently struggling to survive. She explained that businesses want to hire staff, but the rising costs are making it very difficult.
“Businesses are doing their best to stay afloat,” she said. “They want to recruit workers, but the cost of employing people is a major challenge right now.”
The Federation of Small Businesses (FSB) also shared similar concerns. Chris Russell, a senior policy manager at the organisation, said many small businesses are reducing their workforce.
According to an FSB survey covering the last three months of 2025, about 26 percent of businesses said they were employing fewer workers compared with the previous quarter. Russell said this was the worst result since the survey began more than ten years ago.
He explained that rising employment costs are changing how businesses hire workers. Instead of taking chances on inexperienced candidates, many companies now prefer applicants with stronger qualifications and proven work experience.
“When the cost of employing people increases, it changes employer behaviour,” Russell said. “Businesses become more careful and look for candidates who already have the right skills.”
He added that companies are increasingly reluctant to hire people with gaps in their work history or limited experience. This trend often puts young people at a disadvantage because many of them are entering the workforce for the first time.
These warnings came as a parliamentary committee is investigating the growing number of young people who are not in education, employment, or training. These individuals are commonly known as “Neets.”
The number of young people in this group has risen to almost one million, raising concerns among policymakers and economists.
Last year, the government asked former health secretary Alan Milburn to lead a review into youth unemployment and economic inactivity.
Milburn said many young people are facing serious challenges and feel uncertain about their future. He warned that young workers today may have fewer opportunities than previous generations.
He said many people believe the long-standing idea that each generation will have a better life than the previous one may no longer be true.
“I think people feel that the social contract in society is being broken,” Milburn said. “There is a growing concern that young people today may have worse prospects than their parents.”
Business surveys also show that companies are worried about economic conditions in the coming year. According to the BCC, more than half of the businesses that responded to its survey said they expect it will be difficult to grow in 2026.
Many companies are also concerned about rising global tensions, including the conflict involving Iran, which could push energy and shipping costs even higher.
Small business owners say these pressures are already affecting their hiring decisions. Many firms now prefer candidates who have strong qualifications and a stable employment record.
Business leaders say this trend can unintentionally hurt young people, who are more likely to be starting their careers and may not yet have the skills or experience employers want.
The British Retail Consortium (BRC) highlighted another challenge facing young workers. A survey of younger employees found that many of them want flexible working arrangements.
About 70 percent of young workers said flexibility was important to them. This number increased to 73 percent among those working part-time.
Retail companies often offer flexible, entry-level jobs that are suitable for young people entering the workforce. However, the BRC warned that new employment rules could reduce the number of these opportunities.
The organisation said that if employment reforms are not implemented carefully, they could make it harder for businesses to offer flexible jobs.
Retail plays an important role in providing employment for young people in the UK. According to the BRC, about 780,000 retail jobs are held by workers aged 16 to 25.
This means young people make up around 28 percent of the retail workforce. As a result, retail remains one of the largest entry points into employment for young workers.
Business groups say supporting youth employment is important not only for individuals but also for the wider economy. They are calling for policies that balance worker protections with the need to keep hiring affordable for businesses.
Without this balance, they warn that many young people could continue to struggle to find their first job and gain valuable work experience.
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