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Dr Neil Lee
Head of the socio-economic centre
T 020 7976 3611
Dr Neil Lee

The Budget will do little to help the crisis of youth unemployment

Authors: Dr Neil Lee Neil Lee

21 March 2012

The Budget had little to say on youth unemployment. This was partly because of the Youth Contract – going live at the start of April. Yet, as our Missing Million research programme argues, youth unemployment is a serious crisis for the UK. Given the scale of the problem it is surprising that new money wasn’t found.

There was one new announcement: the government will pilot a series of ‘enterprise loans’ to ‘help young people set up and grow their own business’. This builds on other measures – like the New Enterprise Allowance – which try to encourage entrepreneurship. And, in theory, helping people into entrepreneurship sounds like a great idea. 

However, creating a new generation of entrepreneurs isn’t a simple task. Enterprise education is a good thing, and everyone wants a dynamic, enterprising society. But most people simply don’t have the skills needed to set up a successful new business. The Work Foundation is holding an event on this in May.

Schemes like this need to be accompanied by high quality training or mentoring (something the government is rolling out for established entrepreneurs through Business Coaching for Growth). The Prince’s Trust is one organisation which does this well. Otherwise there’s a risk that the government will be setting people up in businesses with little chance of success. 

The type of companies that will be set up also matters. Some firms create new jobs, but most don’t. Unskilled entrepreneurs tend to create new ventures which are unlikely to expand, and  in many cases, simply divide up existing local markets between one more firm. The quantity of new firms is important, but the quality matters more if there is to be any useful impact on the local economy.

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