Rising Youth Wage Costs Risk Deepening NEETs Crisis, Manufacturers Warn

Manufacturers are warning that further sharp increases in minimum wage rates risk adding to already severe cost pressures and could make it harder for firms to create the jobs and training places needed to tackle the UK’s growing NEETs crisis.

The warning comes as Alan Milburn’s independent Young People and Work review has underlined the scale of the challenge, with nearly one million young people aged 16 to 24 not in education, employment or training and the UK at risk of a “lost generation” without stronger routes into work.

Make UK says wage policy must therefore support fair pay while preserving the entry-level jobs, apprenticeships and workplace training that young people need to get a foothold in industry.

The National Living Wage rose by 4.1% to £12.71 in April 2026, while rates for 18 to 20-year-olds increased by 8.5% and apprentice and 16 to 17-year-old rates rose by 6%. Make UK’s evidence shows that, while relatively few manufacturing workers are paid directly at the wage floor, increases continue to have a much wider effect across pay structures as employers seek to maintain differentials and manage union negotiations.

Survey evidence from Make UK shows that 39% of workers in UK manufacturing businesses either have received or will receive a pay rise as a result of the new National Living Wage rate in 2026.

A third of manufacturers have increased prices in response to higher National Minimum Wage and National Living Wage costs, while 27% have automated more processes, 20% have reduced overtime, 18% have reduced or restructured their workforce and 17% have reduced overtime or shift premium pay.

Although the proportion of firms passing costs on through price rises has fallen from nearly half in 2025 to 33% this year, manufacturers say this reflects limited scope to increase prices further, rather than reduced pressure on margins.

Manufacturers are eager to recruit, retain and develop the next generation of skilled workers, and so welcome the Low Pay Commission (LPC)’s consideration of the approach to pay for younger workers. But if the Government is serious about responding to the NEETs crisis highlighted by the Milburn review, it must ensure employers can continue to offer the first jobs, apprenticeships and training places that help young people into work.

In recent years, the youth and apprentice rates have risen much faster than the headline NLW rate, progressing towards the Government’s goal of reducing the NLW age threshold to 18 but also further restricting employers’ ability to hire and invest in those workers.

Make UK’s recommendation is that no alignment of the 18-20 rate and NLW should take place before 2029 and, as Alan Milburn prepares his final Young People and Work report later this year, the Government should fully reconsider its aim of 18 year olds becoming eligible for the NLW.

To ensure businesses can still offer employment and training opportunities for young people, age differentials should be kept and the recent pace of increases slowed. In 2027, the youth and apprentice rates should not rise by more than the NLW.

For adult workers over the age of 21, the proposed 3.7% increase to the NLW reflects where many manufacturers are settling their pay in 2026 and expected to settle in 2027. However, the LPC must still take care in its recommendations to reflect the wider impact of other employment costs, industrial energy prices and uncertainty in global trade on hiring and pay.

Jamie Cater, Head of Employment Policy, Make UK said:

“Manufacturers support fair pay and want to create high-quality, skilled jobs. But at a time when the state is rightly focused on getting more young people into work, wage policy must not make it harder for employers to offer the entry-level roles and apprenticeships that provide that first step.

“Higher wage floors are feeding through into wider pay structures, prices, overtime, recruitment and investment. A 3.7% increase in the National Living Wage would be broadly in line with current manufacturing pay settlements, but it cannot be considered in isolation from the severe cost pressures firms are facing.

“Youth and apprentice rates should not rise faster than the National Living Wage. If we want to avoid a lost generation, the priority must be to protect the routes into work that manufacturers can offer, not price young people out of the labour market.”

• Make UK’s submission to the Low Pay Commission’s consultation draws on the responses of 344 manufacturers across its HR Bulletin and Manufacturing Outlook surveys.