Retailers and other UK businesses are becoming less likely to hire young workers as rising employment costs force employers to prioritise more experienced candidates, business groups have warned MPs.
Industry bodies told parliament that higher labour costs, including increases to the minimum wage and employer National Insurance contributions,
are pushing businesses to take fewer risks when recruiting.
The British Chambers of Commerce said young people are increasingly being placed “at the back of the queue” as companies tighten hiring plans.
Kate Shoesmith, the organisation’s director of policy and insights, told MPs that firms are under intense pressure following several years of rising costs.
“Businesses are trying their level best to stay afloat right now,” she said. “They want to hire people, but the simple costs of that right now are really impacting them.”
Young workers losing out in tightening labour market
The warning came as MPs on the Work and Pensions Select Committee investigate the growing number of young people not in education, employment or training (Neets), which has risen to almost one million.
According to the Office for National Statistics, the UK unemployment rate reached 5.2 per cent in the three months to December, with around 1.9 million people out of work.
Among 16- to 24-year-olds, nearly 957,000 are unemployed, highlighting the challenges facing younger jobseekers entering the labour market.
Business groups said rising wage bills are prompting employers to favour candidates with stronger qualifications or more work experience.
Chris Russell, senior policy manager at the Federation of Small Businesses, said cost pressures are forcing companies to rethink hiring decisions.
“When the cost of employing people increases, it changes behaviour,” he said.
“When we ask whether businesses would employ someone with less experience or fewer qualifications, members increasingly say that as wages and employment costs have increased, they are looking for people who are more qualified and don’t have gaps in their CVs.”
A survey of small businesses covering the final quarter of 2025 found 26 per cent were employing fewer workers than the previous quarter, the highest level recorded since the survey began more than a decade ago.
Retail remains key entry point to work
The British Retail Consortium said the retail sector continues to play a vital role as an entry point into employment for young people.
Around 780,000 retail jobs are currently held by people aged 16 to 25, representing 28 per cent of the industry’s workforce.
However, the organisation warned that upcoming labour reforms could unintentionally reduce opportunities for entry-level work if not implemented carefully.
Retailers are particularly concerned about how the Employment Rights Act might affect the availability of flexible roles often taken by younger workers.
The BRC said survey data showed 70 per cent of young retail workers want flexible working arrangements, rising to 73 per cent among part-time workers.
It warned that reforms designed to strengthen worker protections could restrict employers’ ability to offer the flexible entry-level roles that many young people rely on to begin their careers.
Fears over long-term prospects for young people
The government has already commissioned a review into youth unemployment and economic inactivity led by former health secretary Alan Milburn.
Milburn said there is growing concern that younger generations now face worse economic prospects than those before them.
“I think people feel that the social contract that we’ve had in society – that each generation would do better than the last – is now being broken,” he said last month.
Business groups also warned that wider economic uncertainty could further dampen hiring plans, with companies already cautious about future cost increases and global geopolitical tensions.
The BCC said more than half of firms in a recent survey expect to struggle to grow this year, highlighting the fragile outlook for employment across several sectors, including retail.
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