Fears of a “lost generation” of workers have intensified after a leading business group forecast that youth unemployment will climb to its highest level in years as businesses cut investment and become increasingly cautious about hiring.
The British Chambers of Commerce (BCC) expects unemployment among 18 to 24-year-olds to rise to 17.8 percent in 2027, up from 14.6 percent this year and 13.9 percent in 2025.
The warning comes just days after former Labour minister Alan Milburn cautioned that the number of young people not in education, employment or training could reach 1.25 million by the early 2030s without urgent intervention.
The BCC’s latest economic forecast shows a subdued picture for the wider economy, with business investment expected to fall by 2.2 percent this year and overall economic growth forecast at 0.8 percent. The organisation said rising employment costs, global uncertainty and weaker business confidence were weighing on recruitment and expansion plans.
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Businesses become more cautious about hiring
The forecast suggested employers are becoming increasingly selective about recruitment as they face higher National Insurance contributions, wage costs and economic uncertainty.
The BCC said unemployment across the wider workforce is expected to rise to 5.2 percent this year before easing slightly in 2027. Business investment, often seen as a key driver of productivity and job creation, is expected to contract despite modest growth in consumer spending.
David Bharier, head of research at the BCC, said businesses continued to face a difficult trading environment.
“Much hinges on the course of the Middle East conflict. Inflation is likely to edge towards four per cent this year, but the Bank of England faces a different scenario compared with the 2022 crisis,” he said. “Weaker growth, rising unemployment, and already restrictive monetary policy mean the Bank could seek to manage this without raising the interest rate and risking further damage.”
He added that while the UK was not in a recession, “the economy remains trapped in a cycle where each recovery is interrupted before gaining traction, and firms go back on the defensive. With youth unemployment approaching 18 per cent by mid-2027, the UK risks weakening the skills pipeline it needs for the next economy.
“The long-term economic potential remains enormous. The UK has world-leading research institutions, rapid AI adoption and the third largest AI investment ecosystem globally. But realising that potential requires reducing the cost burden on firms, rewarding productive risk-taking, and positioning UK businesses to capture the opportunities that will drive future economic gain.”
Youth employment concerns continue to grow
The forecast adds to mounting concern over the availability of entry-level jobs, apprenticeships and work experience opportunities.
Milburn’s review last week argues that young people are being failed by systems that no longer provide clear pathways into employment and warns that Britain risks creating a generation locked out of work. Recent figures have also shown growing competition for junior roles, with some employers reporting significantly higher application volumes for entry-level vacancies.
The BCC said advances in artificial intelligence and wider structural changes in the economy were likely to reshape the labour market further, increasing pressure on younger workers seeking their first opportunities.
Employment specialists have increasingly warned that while employers continue to report skills shortages in some sectors, many younger people are struggling to gain the experience needed to secure permanent work.
The forecast is likely to intensify calls for more apprenticeships, stronger vocational pathways and additional incentives for businesses to recruit and train young workers.
Investment slowdown raises wider concerns
Beyond the labour market, the BCC forecast suggested the UK economy will continue to grow only modestly over the next two years.
While inflation is expected to fall gradually, businesses remain concerned about operating costs and the impact of geopolitical uncertainty on trade and investment decisions.
The organisation said stronger business confidence and investment would be essential if the UK is to improve productivity and create more opportunities for workers entering the labour market.
William Furney is a Managing Editor at Black and White Trading Ltd based in Kingston upon Hull, UK. He is a prolific author and contributor at Workplace Wellbeing Professional, with over 127 published posts covering HR, employee engagement, and workplace wellbeing topics. His writing focuses on contemporary employment issues including pension schemes, employee health, financial struggles affecting workers, and broader workplace trends.
- William Furney
- William Furney
- William Furney
- William Furney
