The kids aren’t alright
The UK is feeling the cost of having its youth waiting for career opportunities that do not come knocking.
From March to May 2026, the Office for National Statistics (ONS) reports that the UK’s unemployment rate held at 4.9 per cent, the same result as that of three months prior. This is generally within expectations and considered relatively stable amid the steady decline in both job vacancies and private sector wage growth in the UK. However, this outcome belies a brewing problem that captures the enduring negative effects to the future of labour and the wider British economy.
Young, dumb, and broke
In early July, the Department of Work and Pensions (DWP) released an interim report on young people who are not in education, employment, or training, otherwise known as NEETs. These are individuals who are not only unemployed but are also economically inactive for various reasons. In its first quarter report for 2026, the DWP estimated that over a million British individuals between ages 16 and 24 are considered NEETs. This makes up 13.5 per cent of citizens in the same age bracket, higher than the reported 12.8 per cent in the previous quarter.
Graph 1 further illustrates the steady increase of NEETs over the past few years, which began in the second quarter of 2021 with a count of 673,000 or 9.7 per cent of young British individuals. Putting that into perspective, the UK’s NEET rate fell below 10 per cent only once in the last 25 years and has not changed significantly. This indicates that this is not a cyclical event; rather, it is an unfortunately constant feature of the British demography.
While it is a consistent track record, it is not one that Britain would like to have. In 2025, the UK had the second highest NEET rates across its European cohort at 12.8 per cent next to Romania’s 16.5 per cent. At the other end of the spectrum is the Netherlands – which, at 3.9 per cent, has consistently observed the lowest NEET rates among its youth population from 2015 to 2025. Other major EU economies such as Germany and France report better outcomes at 8.2 per cent and 10.8 per cent, respectively. This indicates that the UK’s problem with NEETs has worsened and needs to be addressed.
Problem child
The issues are also felt at the individual level: a NEET could lose between 0.35 per cent and 1.2 per cent of their income a month. Depending on the age of youth inactivity, income losses could go up to some USD 70,000 a year. Throughout an individual’s working lifetime, total losses can reach up to USD 392,000. This means that their consumption activity is also constrained, which adds a drag to the economy.
If we look at it on a broader scale, Graph 2 further highlights the estimated total economic costs of having a million NEETs in an economy. Some USD 51 billion in aggregate output would have been generated had that million youths been in full-time employment. Accounting for the lost output over a worker’s lifetime, that is estimated at USD 85 billion at net present value.
For public finances, losses take the form of foregone tax revenues around USD 5,000 per individual per year and net USD 20,000 over one’s lifetime. Aggregating for 1 million NEET individuals, these losses could reach up to USD 18.7 billion.
Further, additional state expenditures on various welfare benefits and health spending is estimated at USD 4.5 billion to support unemployed individuals. Other benefit payouts incurred such as housing or peace and order-related spending is estimated at USD 3.6 billion. All in all, the total individual and societal cost of the million individuals NEET to the British economy is around USD 167.9 billion yearly. This is already higher than the proposed USD 120 billion national defence budget for financial year (FY) 2026-2027 and compares to the USD 194.3 billion education budget for the same year. If not for the losses incurred from the NEET individuals, the USD 167 billion price tag can almost pay off the total USD 178 billion budget deficit of FY 2025-2026.
We are now left with the conclusion that having this much young NEETs is economically and fiscally unsustainable for the UK economy. This is notwithstanding the moral obligation of giving young people the opportunity to be productive and to achieve their potential. In short, Britain must address the problem of its young people suffering from chronic economic inactivity.
However, solving the issue at hand is easier said than done. Research shows that there are a multitude of reasons why young individuals end up as NEET. Low academic qualifications, health-related disabilities, and family circumstances including early pregnancy had the highest links to the likelihood of becoming NEETs in the UK. Further, age and geography also factor in as varying NEET rates are observed across different locations and at different ages. Gender also plays a role as more men are NEET compared to women. Saying that this is a wicked problem is an oversimplification.
To the credit of the UK government, they tried tackling the issue through various programs such as the New Deal for Young People, the Future Jobs Fund, and the Work Programme, among others. However, a decisive solution is yet to be found. Whether the newly installed Prime Minister Andy Burnham fares better than his predecessors in addressing this issue and successfully have the young guns go for it remains to be seen. Otherwise, we are constrained to keep recommending a conservative investment position in the UK.
This original article has been produced in-house for Lundgreen’s Investor Insights by on-the-ground contributors of the region. The insight provided is informed with accurate data from reliable sources and has gone through various processes to ensure that the information upholds the integrity and values of the Lundgreen’s brand.
