New post

The one-million line was crossed this week. The NEET total bottomed at around 750,000 in 2017–18 and has drifted higher since. The acceleration in 2024–26 is not a statistical artefact of LFS survey reform — it reflects genuine deterioration in the youth labour market, driven overwhelmingly by a rise in economic inactivity rather than registered unemployment. Young people are not being counted as unemployed because they have stopped looking. That is the harder problem: a system that has learned to write people off.

GBTT published its full analysis of Thursday's release at gbtt.info/neet-may-2026. The fiscal exposure — welfare cost, foregone income tax, productivity loss — runs to an estimated £20 billion or more annually.

The headline figure is a policy failure in a single number. A million young people outside the economic mainstream — not counted as unemployed because they are not looking, not in education because the system has not reached them — represents the accumulated consequence of a welfare framework that is better at recording inactivity than reversing it. The long-term sick cohort of approximately 270,000 is the sharpest indicator: mental health conditions among under-25s have worsened materially since 2020, and the state's response has been to shift people onto PIP rather than invest in the structural interventions that might bring them back.

This is also a productivity story. Every young person locked out of the labour market for an extended period suffers permanent scarring effects on lifetime earnings and contribution. The fiscal cost — £20 billion or more per year on GBTT's estimates — does not appear on any Treasury spreadsheet as a line item. It should. You cannot fix a fiscal problem this large while ignoring the structural driver that is making it worse.

CPI was never designed to measure what households actually spend. It does not capture the full weight of mortgage costs, council tax or the true burden of rent — items that for most families are not marginal but dominant. The HCI corrects for this: council tax alone contributes 0.22 percentage points more to HCI than to CPI. Energy, meanwhile, is moving in the wrong direction: its contribution to household cost inflation doubled between December 2025 and March 2026, from 0.10 to 0.20 percentage points. The Ofgem cap cut that reduced April CPI was a one-period accounting effect. The structural energy cost pressure facing households has not gone away.

The five-year cumulative numbers are where the full scale of the problem becomes visible. Mortgagor households have seen their costs rise 37.6% over five years. Social renters, 33.9%. Private renters, 30.7%. Prices have not fallen back. They have reset at a permanently higher level. Ministers who tell voters that the cost-of-living crisis is fading are citing a number that was not designed for the job. GBTT's full analysis is at gbtt.info/data-release-hci-may-2026.

Released the prior week, but still the dominant macro story. A 4.8-point collapse in services in a single month is not a drift — it is the kind of reading that forces Q2 GDP forecasts to be revised. Final PMI readings arrive next week (manufacturing Monday, construction Wednesday, services Thursday) and will confirm or revise the flash numbers. If the services final holds at 47.9 or lower, the case for any near-term economic optimism becomes very difficult to construct.

The Nationwide reading of +3.5% annual growth in May is, on the face of it, resilient housing data. But the timing should give pause. Labour market deterioration, a PMI services collapse, and the weakest consumer confidence since early 2025 tend to feed through to housing demand with a lag of two to four quarters. The Nationwide reading reflects transactions agreed in April and before — before the services PMI shock, before the NEET million was crossed. Halifax May data, due next Friday, will be an early test of whether confidence is holding. Do not expect the housing market to be immune to what the rest of the data is saying.

The gilt rally is welcome but should be read carefully. Seven sessions of gains on the back of Iran optimism and a CPI print that was largely a regulatory artefact is not the same as a structural improvement in UK fiscal credibility. The ten-year at 4.82% still prices a meaningful term premium above the Bank Rate of 3.75%. At 5.49%, the thirty-year reflects a market doing the long-run debt sustainability arithmetic — and not particularly liking the answer. Trump's Saturday announcement that no deal has been reached with Iran changes the near-term picture materially. The bond rally was partly built on the assumption that geopolitical risk was fading. It wasn't. Oil will open higher on Monday. Risk assets will face selling pressure. For UK gilts specifically, the combination of reviving energy inflation expectations and an already-overshooting fiscal position is not comfortable and will add further pressure on what was always a fragile rally.