Young people in the United Kingdom are bearing the brunt of a weakening jobs market as businesses freeze recruitment, with the Bank of England warning that economic uncertainty is creating a "low-gear economy" in which workers are retained but new employees are increasingly difficult to hire.
Deputy Governor Clare Lombardelli said employers were holding on to existing staff while delaying recruitment because of uncertainty surrounding the Middle East conflict, higher energy prices, increased taxes and weak consumer demand.
In an interview on Tuesday, November 10, Lombardelli described the situation as a "low-hire, low-fire" labour market, where companies are reluctant both to recruit and to make redundancies.
She warned that the approach was particularly damaging to young people entering the labour market for the first time because they have fewer opportunities to secure entry-level positions.
The hospitality and retail industries have been particularly affected, as these sectors traditionally provide jobs for school leavers, university graduates and young workers with limited experience.
"What you see is the cost falling on young people, so you can see this rapid rise in the number of young people who are struggling to find jobs," Lombardelli said.
Britain's unemployment rate has climbed to 4.7 per cent, while youth unemployment has reached its highest level outside the Covid-19 pandemic since 2015.
Nearly one million young people are also not in education, employment or training, highlighting the growing difficulty of transitioning from school into work.
The recruitment slowdown is unfolding as businesses contend with higher operating costs linked to the Middle East conflict, which has driven up energy prices and increased uncertainty over future expenses.
Retailers and hospitality operators are particularly exposed to changes in household spending because consumers facing higher living costs tend to cut back on discretionary purchases, restaurant visits and other services.
Higher taxation and wage-related costs have added to the pressure, making some employers more cautious about expanding their payrolls.
Lombardelli said businesses surveyed by the Bank of England increasingly viewed hiring younger workers as riskier than before.
The comments come as the Bank of England balances the threat of persistent inflation against weakening economic activity.
The central bank recently raised its benchmark interest rate from 3.75 per cent to 4 per cent, the first increase since August 2023. Lombardelli supported the decision and said another increase in December remained possible, depending on energy prices, developments in the Middle East and incoming economic data.
She cautioned, however, that higher unemployment does not automatically reduce inflation. Businesses that retain existing workers while recruiting only for difficult-to-fill positions may continue facing wage pressures.
The warning highlights a difficult challenge for policymakers: controlling inflation without further weakening an economy in which young people are already struggling to find their first jobs.
For Britain's younger generation, the consequences could extend beyond immediate unemployment, affecting career progression, earnings and long-term financial security.
