The labour market situation for young people in London today is among the toughest since the fallout from the 2008 financial crisis.
There are just over 900,000 16-24 year-olds in London. Many are in education, some on apprenticeships, some working part or full-time. But increasing numbers are struggling to establish themselves in the labour market, piling financial pressure on them and their families and undermining their sense of self-worth.
Long-standing difficulties with the Office for National Statistics (ONS) labour force survey have affected analysts’ attempts to get a clear picture of what is going on in the labour market. However, various data sources make it apparent that conditions for young people trying to find work have worsened.
Nationally, the unemployment rate has risen from 10.7 per cent in 2022 to 14.0 per cent in 2024. There has been a slight easing of this in the past couple of quarters, but the 2024 annual youth unemployment rate was the highest for ten years. And in London it is significantly higher.
Unhelpfully, there is a paucity of granular London data. However, Trust for London quotes a youth unemployment figure of 14.6 per cent at the end of 2023 and the NOMIS dataset from the ONS has a figure from pooled date for April 2024-March 2025 of 17 per cent.
These unemployment figures are worrying, and a further labour market indicator, that of inactivity rates, compounds the concern. ONS data show that, nationally, the economic inactivity rate for young people (that is, those not able to work or not seeking it ) is running at over 30 per cent and has been on a rising trend for many years.
Economic inactivity reflects certain choices – for example, if a young person chooses to stay in education. But since 2023, this measure has been rising for young people out of full-time education. The current number is around the highest level recored since the current series began in 1992.
A recent House of Commons briefing paper on youth unemployment notes how, since the start of the pandemic, there has been an increase in the number of 16-to-24-year-olds who are economically inactive due to long-term illness. This has been driven largely by an increase in the number of young people with a mental health condition.
There is a well-worn narrative that seeks to explain London’s high youth unemployment rate: employers are looking for ever higher skill levels; there’s a misalignment between the school curriculum and labour market needs; there’s insufficient investment in further education and a paucity of apprenticeship schemes.
A post-2022 twist comes from the rapid and speculative adoption of AI tools by many firms. This is cutting entry-level jobs in administration, customer services and even software development, and wiping out swathes of graduate entry jobs.
The recruitment site Adzuna reports that entry-level jobs now only account for 25 per cent of the market in the UK — down from 28.9 per cent three years ago – and that the number of job vacancies has declined by 32 per cent since 2022. It also reported Dario Amodei, chief executive of AI company Anthropic, warning that the technology could wipe out half of entry-level jobs in the next five years.
This is in line with research about the US. A recent paper from Stanford University shows how employment has declined for young workers in AI-exposed occupations (they highlight software engineers and customer service agents). Growth in employment as a whole continues, but for young people it has stagnated.
Those with no toehold in the labour market of any kind are caught in a terrible bind, as entry-level jobs both for those with GCSEs and those with A levels and degrees vanish. These qualification pathways were traditional routes into well-paid and stable careers. But it is not like that anymore.
Chatting to a Sainsbury delivery driver, who is self-funding a coding degree because everyone assured him coding was a gateway skill to a well-paid software developer job, I wondered what he should do. Crack on, double-down and try for a Masters? Take on more debt in the vague hope of landing, eventually, a high paid role or grind out the hours in his current role on a just above minimum wage?
The rapid adoption of AI is changing our labour market in ways we still don’t really understand – and far more quickly than policy can respond. There will be winners as well as losers, but if we do not want to further entrench employment inequalities we need to be braver about finding a way to recycle some of the staggering profits the tech firms are making into specific support for those whose labours they are making redundant.
The recent UK-US tech agreement goes big on new data centres, but these do not, of themselves, generate many jobs beyond the construction phase. They are capital-intensive, not labour-intensive. A temporary one-percent windfall tax on AI-excess profits earned in the UK could provide a ring-fenced fund to support thousands of paid apprenticeships in not just AI and digital sectors, but also those where there are long standing shortages, such as nursing or childcare. In this way, the AI transition can be made more inclusive.
Meanwhile, in the real world, the government’s policy response is to establish a Youth Guarantee so that every young person aged 18 to 21 has access to further learning and help with getting a job or an apprenticeship. Youth guarantee trailblazers have been launched in eight mayoral authorities in England, and London has been awarded £30 million for 2025-26 to invest in locally-led employment support programmes.
London government – the Mayor and London Councils – has long highlighted how youth unemployment disproportionately affects black Londoners, disabled youth, and those with mental health challenges. Its response has tended to focus on tackling the fragmented nature of employment services provision.
As the most recent London Councils report, Breaking Barriers, argued, “there are many bodies operating at the national, London, sub-regional, and borough levels which offer employment and skills services to young Londoners, but the lack of integration and collaboration among them hinders effective support.”
As part of the London response, the Mayor set-up the No Wrong Door programme, which seeks to ensure that whichever route a Londoner chooses, they get directed to the appropriate guidance or training to help them gain employment and boost their skills. This objective is delivered through four sub-regional partnerships, which are the recipients of the trailblazer funding.
One of those partnerships, the Local London integration hub, focuses specifically on adults (19+) with special educational needs or disabilities and on young people with few qualifications, especially those without Level 2 English or maths.
Local London covers nine outer-London boroughs across the eastern side of London. It focuses on support for schools through their career hubs, which provide self-development and career management skills for students and meaningful exchanges with employers.
It also looks to support young people by capturing their voices through youth summits, so that interventions are more closely aligned to young people’s concerns. The team is helping to develop a core offer that all young people in London should be able to access through interactions with their own dedicated youth frontline advisor, though future funding for this resource-heavy initiative is not yet secured.
Through its engagement with local businesses, Local London found that many SMEs can be overwhelmed with applications when they advertise a vacant role. Without the resources to efficiently manage the process, they can come to rely on word of mouth and people they know when choosing who to take on. This compounds the problems of those with low levels of social capital.
Caroline Kandaya, who leads on the integration hub at Local London, would like to see more direct intervention to support firms with taking initial steps to create and recruit young people for new roles.
Kickstart, the Covid-era employment support scheme for young people, was widely criticised for being overly bureaucratic and inflexible, but Caroline argues that the level of financial support – paying 100 per cent of the age-relevant National Minimum Wage, National Insurance and pension contributions for a 25-hour week for six months – was crucial in mitigating the costs of employing someone in a situation where margins are tight across the firm.
The integration hubs have the potential to address long-standing failings in the functioning of London’s labour market. But they need much bolder levels of investment and less prescription. London government has long argued for greater flexibility over the use of the apprenticeship levy and for some control over the underspends, so that resources can be brought together.
Moves to provide London with an integrated funding settlement, which will include adult skills and employment support and be multi-year, should be the catalyst for amplifying the work of the hubs.
There is momentum behind them. But to really push on, they need the finances to develop their tech infrastructure, to employ well-resourced youth advisors and – wouldn’t this be something? – to have the ability to pilot a Kickstart-like programme of financial support for local small and medium enterprises. to take on a youngster who needs a helping hand into the labour market.
All the ingredients are there to allow the hubs to make decisive interventions. It is time to bring them all together.
Follow Richard Derecki on Bluesky. Photo from Local London.
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