A new report from The Open University reveals a growing mismatch between employer needs and available talent – in turn preventing organisations from addressing persistent skills shortages while large numbers of young people remain locked out of the workforce.
The ‘Business Barometer 2026: Harnessing young talent pipeline in a digital world’ is based on a survey of 1,500 UK employers and 1,000 young people aged 16–24 who are currently not in education, employment or training (NEET). It finds that over half (57 per cent) of employers are experiencing a skills shortage, a figure which is up 3 per cent from last year. Additionally, 42 per cent revealed they’re expecting their skills shortage to worsen.
The report highlights the growing impact Artificial Intelligence (AI) is having – with over half (51 per cent) of employers seeing an impact on hiring or recruitment processes. The report shows signs of some businesses decreasing early-career roles with one in five (19 per cent) organisations reporting a decrease in recruitment over the last 12 months, while 42 per cent have put the decrease in this recruitment down to the wider adoption of AI doing more-entry level tasks. Not surprisingly, more 16–24-year-old NEETs agree that AI is threatening their future job prospects (42 per cent) and are wary about AI impacting their future careers (49 per cent) than disagree.
With more than a million young people aged 16 to 24 currently classed as NEET, the digitalisation of early-career roles is a concerning reality for solving this issue and for employers who can’t build future talent pipelines.
Positively, almost half (47 per cent) of employers report they are currently prioritising the recruitment of young people to combat this. The latest Business Barometer finds that young people show a strong appetite to work and develop skills, yet they face significant barriers to entry, even though:
- 68 per cent would be willing to train or upskill to improve their job prospects
- 78 per cent would be likely to stay with an employer that offers training and development long-term
Even though 80 per cent of employers say they are prepared to train young people entering the workforce, their words are not always backed by action. Only 43 per cent offer work experience placements, and around a third offer graduate schemes (34 per cent) or paid internships (33 per cent). In addition, just 34 per cent have initiatives for workers under 25, and only 11 per cent target NEETs directly.
NEETs say that mental health challenges (40 per cent), lack of experience (37 per cent) and feeling underqualified (35 per cent) are key barriers they’re facing to become truly work ready. This reinforces a gap between employer expectations and young people’s access to the experience and support needed to enter work.
It isn’t all a straightforward fix – as economic pressures are massively shaping employer behaviour. More than three-quarters of organisations (76 per cent) say economic uncertainty has made recruitment or training more difficult, while 43 per cent have hired fewer staff over the past year.
Despite advances in AI, most employers are reporting skills shortages that continue to affect organisational performance, with 54 per cent reporting increased workloads, 44 per cent lower morale and 35 per cent declining staff wellbeing. Employers and educational providers must partner to ensure the next generation does not become a lost generation by adequately supporting them to become the leaders and experts of tomorrow.
”Despite the rising unemployment levels, skills shortages across the four nations of the UK have remained a stubborn problem faced by many employers,” said Mark Durkin, Pro Vice Chancellor, Partnerships and Enterprise at The Open University. “It is of the utmost importance that we work together to build these vital future skills pipelines. Young people are, of course; the digital experts, nurses and engineers of the future and we need to work together to build those vital future skillspipelines in a more flexible and accessible way through innovative partnering. If we are as serious about growth as we say, we must be acting with the same urgency when it comes to creating opportunity and providing our young people with the knowledge and skills to convert such opportunity into value; for themselves, the economy and wider society.”
To find out more how employers can harness new talent, visit www.open.ac.uk/business.
