Employers cut entry-level hiring as skills shortages rise
UK employers report worsening skills shortages while reducing recruitment and largely overlooking young people outside work and education.
UK employers are struggling to fill skills gaps while hiring fewer people and cutting back on entry-level recruitment, according to The Open University's Business Barometer 2026.
More than half of employers, 57%, say their organisation is experiencing skills shortages, up from 54% last year. Yet 43% hired fewer staff over the past 12 months and 42% expect skills shortages to worsen over the next five years.
The findings point to a disconnect between employers' concerns about future skills and their current recruitment activity.
Nineteen per cent of employers have reduced recruitment into early-career roles. Among those organisations, 42% said wider use of AI and automation of entry-level work was a factor.
At the same time, more than one million young people aged 16 to 24 are not in education, employment or training.
The Open University's survey of young people found strong appetite for work and development. Sixty-eight per cent said they would train or upskill to improve their job prospects. Nearly four in five, 78%, said they would stay longer with an employer that offered training and development beyond their immediate role. Only 6% expected to remain outside education, employment or training in two years' time.
Despite that, employer engagement with younger talent remains limited.
Just 34% of employers offer recruitment, retention or training initiatives for under-25s. Only 11% have initiatives aimed at young people who are not in education, employment or training.
The report also found signs that employers are becoming more cautious about workforce planning. More than three-quarters, 76%, said economic uncertainty had made recruitment or training more difficult during the past year. Only 39% have a written skills plan in place, down from 46% a year ago.
The Open University argues that employers need to look beyond established talent pools and invest more in developing future skills pipelines. The report identifies young people currently outside education and employment as one of the most underused sources of future talent.
The contradiction
Despite widespread skills shortages, many employers are recruiting fewer entry-level workers and investing little in young people outside work and education.
- 57% of employers report skills shortages, up from 54% in 2025
- 43% have hired fewer staff over the past 12 months
- 19% have reduced recruitment into early-career roles
- 42% say AI has contributed to lower early-career recruitment
- 68% of NEETs would train or upskill to improve job prospects
- 78% would stay longer with an employer that offers training and development
- One million young people are outside work and education, yet only 11% of employers have initiatives aimed at engaging them.
These figures suggest an emerging talent pipeline problem looming large for business: employers need skills, but many are recruiting fewer young people and offering limited support to those outside work and education. It's a challenge not simply about skills or a shortage of skills, but a shortage of pathways into work.
The Business Barometer 2026 is based on surveys of 1,500 UK business leaders with responsibility for recruitment and 1,000 young people aged 16 to 24 who are not in education, employment or training. The research was conducted by Opinium Research in spring 2026.
Get the report from The Open University