The British Chambers of Commerce predicts youth unemployment in the UK will climb to 17.8% by mid-2027 from 16.9% this year. The business lobby group cited AI tools replacing entry-level workers and increasing national insurance contributions as key factors driving joblessness among young people. The forecast comes as the BCC warns the UK economy remains trapped in a cycle where recoveries are interrupted before gaining traction, with concerns about a "lost generation" of workers emerging.
BCC Forecasts 17.8% Youth Unemployment by Mid-2027
The British Chambers of Commerce economic forecast report predicts total unemployment will reach 5.5% next year, up from the current 5%. GDP is expected to grow by 0.9% this year, then 1.0% in 2027 and 1.3% in 2028. Inflation is forecast to peak at 3.8% by the end of 2026 before easing to 2.3% by 2027.
Business investment is expected to fall by 2.2% this year, with the BCC citing the Middle East conflict as "a major economic drag" on the economy.
AI Adoption and Payroll Tax Increases Drive Job Losses
The BCC's David Bharier stated that young people are being locked out of jobs because of increasing national insurance contributions and the minimum wage. AI tools being used for work previously done by entry-level workers was cited as a key factor in driving up youth joblessness.
Bharier said: "With youth unemployment approaching 18% 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."
He added that realizing that potential requires reducing the cost burden on firms, rewarding productive risk-taking, and positioning UK businesses to capture opportunities that will drive future economic gain.
Government Review Warns of 1.25 Million Youth Unemployment Without Reform
A landmark government-commissioned review warned that without urgent system reform, youth unemployment could surge to 1.25m by early 2030s. Former health secretary Sir Alan Milburn, who authored the report, called for an overhaul of schools, the welfare system, and the jobs market to avert a "lost generation".
FAQ
What is the predicted youth unemployment rate in the UK by mid-2027?
The British Chambers of Commerce predicts youth unemployment will reach 17.8% by mid-2027, up from 16.9% this year.
Why is youth unemployment expected to increase in the UK?
The BCC cited AI tools replacing entry-level workers, increasing national insurance contributions, and minimum wage increases as key factors driving youth joblessness. The business lobby group also noted that the UK economy remains trapped in a cycle where recoveries are interrupted before gaining traction.
