Sector Leaders Warn Tax Hikes Driving Youth Unemployment Crisis

Hospitality industry leaders are sounding the alarm over rising youth unemployment, pointing to the government’s employer National Insurance Contributions (NICs) increases as a key driver pushing the sector — and the broader economy — toward crisis point.

Senior figures across the pub and hospitality trade are urging ministers to reconsider the NIC rises, arguing the additional financial burden is making it increasingly difficult to bring young workers into the industry.

An interim government-commissioned review into youth joblessness, led by former health secretary Alan Milburn, has lent weight to those concerns, concluding that the contributions hike has significantly increased the cost of employment — with retail and hospitality bearing the heaviest impact. These sectors, the review noted, have traditionally served as the most accessible entry points into the workforce for young people in Britain.

Industry figures cite estimates suggesting the changes have added approximately £4,000 to the annual cost of employing a young worker. Compounding the pressure, recent increases to the National Minimum Wage — now set at £10.85 per hour for 18 to 20-year-olds and £12.71 for those aged 21 and over — have further stretched already tight margins.

The government has also signalled its intention to abolish age-related pay bands entirely, describing the current tiered structure as discriminatory.

Allen Simpson, Chief Executive of UKHospitality, said: “This interim report is clear sighted analysis of how significantly increasing employment costs directly reduces job opportunities, particularly for young people.

“The rapid loss of around 100,000 hospitality jobs after the 2024 Budget and the increase to employer NICs was the canary in the coal mine and should have been recognised as such by the Government.

“The solution is to reduce the cost of employment for hospitality businesses. As the biggest youth employer and driver of social mobility, thousands of job opportunities can be unlocked as a result. The Government needs to make it economically beneficial to employ young people once again.

“As Alan Milburn has said, there needs to be a shift towards getting more people work ready. We agree wholeheartedly, and already have in place supported pathways into work, like the Hospitality Skills Passport, which directly helps people who are out of work into hospitality jobs.

“Utilising this kind of pre-employment training is critical, as well as delivering reform of the Apprenticeship Levy to allow employers to more effectively use their levy funds to support this work.”

Michael Kill, CEO of the Night Time Industries Association, said: “This government has created its own youth unemployment crisis through a tax system that is fundamentally not pro employment and certainly not pro youth employment.

The night time economy has historically been one of the largest employers of young people in the UK, providing essential first jobs, flexible work, training opportunities and long term careers across hospitality, leisure, live events and entertainment. Yet businesses are now being punished for employing people.

Rising National Insurance Contributions, escalating wage pressures and relentless operational costs have destroyed confidence in recruitment across large parts of the sector. Employers are being forced to reduce hours, freeze hiring or stop recruiting altogether because the financial risk of taking on staff has become too high.

The consequence is now clear. Young people are being locked out of the workforce at the very moment they should be building skills, confidence and careers.

You cannot continue increasing the cost of employment while claiming to support growth and opportunity. Current policy is actively shrinking entry level opportunities and damaging sectors that traditionally employ large numbers of younger workers.

If the government is serious about reversing rising youth unemployment, it must urgently reduce the tax burden on employers, starting with National Insurance Contributions, and rebuild confidence in recruitment before long term damage is done to an entire generation entering the workforce.”