The government has announced a youth employment drive backed by £1 billion, that it hopes will help create 200,000 jobs for young people, alongside the "biggest transformation of apprenticeships in a decade".

Work and Pensions Secretary Pat McFadden has announced a “New Deal” for young people that includes:

  • A new Youth Jobs Grant, through which businesses will receive £3,000 for every young person they hire aged 18-24 who has been on Universal Credit (UC) and looking for work for six months. This is expected to support 60,000 young people over three years.
  • Expansion of the Jobs Guarantee to a wider age range, from 18-21 to 18-24, to create more than 35,000 extra subsidised jobs. This brings the total to be supported through the scheme to over 90,000 in the next three years.
  • An Apprenticeship Incentive of £2,000 for each new employee aged 16-24 taken on by an SME. As part of wider reforms, this is hoped to drive progress to the government's target of creating 50,000 more apprenticeships.
  • Further reforms to the Growth and Skills Levy to prioritise young apprentices, secure value for money and give school and college leavers more opportunities than ever to build careers in cutting edge industries.

These changes are backed by an additional £1 billion, taking the total investment into the Youth Guarantee and the additional investment in the Growth and Skills Levy to £2.5 billion over the next three years. This will support almost one million young people and is expected to help deliver up to 500,000 opportunities to earn and learn.

Employers will have more flexibility to upskill their staff through seven new apprenticeship units aligned to Industrial Strategy priorities including artificial intelligence, engineering, clean energy and construction, to begin with.

Foundation apprenticeships, supported with an incentive for employers, will also expand into hospitality and retail from April 2026, building on foundation apprenticeships launched in engineering, manufacturing and digital. These entry-level opportunities will support young people aged 16 to 21 as they take the first step on the career ladder and move from education into lasting employment.

According to the Office for National Statistics, the number of 16- to 24-year-olds not in education, employment or training (known as NEETs) was 957,000 in the three months from October to December 2025 – up from 946,000 in the previous quarter.

McFadden said: “Today, the biggest issues facing the system are the challenges of youth unemployment and the growing number of people on long-term sickness and disability benefits.

“The number of young people not in education, employment or training is much too high at almost a million. Almost all of the recent rise took place before the last election.

“And within it the proportion of NEETs who are sick or disabled has doubled in the past decade and is now 46% of the total. Acting on this should be a cause that motivates us all. The human cost is a tragedy. The waste of potential appalling. And the financial cost enormous.

"The Health Foundation said the “changing health landscape means yesterday’s solutions might not be enough for today’s young people.

He added: "These measures will give life-changing opportunities to young people and significantly reverse the increase we inherited in those not in education, employment or training.

"We are focusing funding where it’s needed most and giving employers the flexibility and support they’ve asked for.

"These reforms will give young people a vital first step on the career ladder and help business leaders recruit the talent that will grow their companies."

The Federation of Master Builders (FMB) has welcomed the announcement. The FMB says small and medium-sized building firms are well placed to help deliver the scheme if it reflects how SMEs recruit and train in practice.

The FMB says it has long argued that youth employment programmes should be judged on whether they lead to lasting employment, not just short-term starts. It has warned that poor transitions into work, a lack of site readiness and limited ongoing support contribute to high drop-out rates in construction, where around 47% of apprentices fail to reach end-point assessment, and has called for employer-led approaches that reduce risk for small firms and improve long-term outcomes.

Brian Berry, Chief Executive of the FMB, said: “The Government’s announcement is an important and welcome step forward. Small building firms already train most construction apprentices and provide a first step into work for thousands of young people each year. A £3,000 hiring bonus can make a real difference by helping to reduce the upfront risk of taking someone on, particularly at a time when cost pressures remain acute for SME builders. With the right approach, this funding has the potential to unlock more opportunities for young people while supporting small firms that are keen to invest in the next generation

“However, the success of this policy will depend on delivery. For small builders, cost is only one part of the equation. Employers need confidence that young people are genuinely work-ready and that support does not stop on day one. Through initiatives such as the FMB’s Build Academy pilot, delivered in collaboration with the CITB and Shooters Hill Sixth Form College, we have seen how employer-led preparation, meaningful work experience and ongoing support can turn a short-term start into a sustained job. Funding must be easy to access, aligned with real vacancies, and backed by practical support if this scheme is to be genuinely transformative.”