Unemployment fall can't mask youth employment crisis ahead of budget

A fall in unemployment is welcome news for the north west economy but must not be mistaken for a turning point amid a growing UK crisis of young people not in education, employment or training (NEET) ahead of next week’s budget.

That’s the view of Graham Gordon, north west regional chair for national accountancy and advisory firm MHA. His comments follow the release of the latest UK labour market data from the Office for National Statistics.

The UK unemployment rate fell to 4.7 per cent in the three months to August, down from 4.9 per cent in the previous three-month period, while the north west figure stood at 4.6 per cent. Annual growth in regular earnings across the UK, meanwhile, rose slightly to 3.7 per cent.

However, the interim findings of the Milburn Review, released earlier this year, highlight the number of young people classed as NEET across the UK is now nearly one million and is expected to keep rising over the coming years.

On Monday, Prime Minister Andy Burnham described the scale of youth unemployment as an ‘economic catastrophe and moral failure’, pledging to ‘invest in the success of our young people’.

It comes ahead of next week’s Budget, the first major fiscal event since John Healey and Andy Burnham became chancellor and prime minister respectively.

Graham said the government must take steps to strengthen business confidence, encourage investment and create job opportunities for young people, while balancing the need to keep public finances under control.

He said: “The drop in UK unemployment provides a boost for the economy, reversing a worrying trend marked by falling vacancies and declining confidence. This follows the upbeat news from the IMF last week that the economy is expected to grow by 1.3 per cent this year, placing the chancellor in a better-than-expected position as we approach the Autumn Budget.

“However, this should not be mistaken for a decisive turning point. The emerging picture for 2027 is one of an economy marked by weak recruitment and cautious business confidence, conditions that are likely to slow down growth in the months ahead.”

Speaking about the number of young people classed as NEET, Graham said: “This raises serious questions about the economy's capacity to generate opportunities for new entrants to the workforce, creating a risk of long term economic and social costs through lost skills, lower productivity and increased welfare dependency.

“Reforming the welfare state must not be viewed simply as a cost-cutting austerity measure, but as a targeted move that incentivises participation in the labour market while ensuring people receive the support they need to return to work.”

He also highlighted the importance of equipping the next generation with the skills required to keep pace with the changing demands of the modern workforce but added that this was a long-term challenge that would not be solved overnight.

Graham added: “We need to make it easier for businesses to employ young workers. Measures such as reducing employer NICs for young workers could encourage businesses to recruit and train new entrants to the labour market, but it will cost money that the Treasury may struggle to find.”