One in six UK young people risk falling outside job market or education, report warns

* Over 1 million UK 16-24 year olds outside job market, education

* Government report blames ​fewer entry-level roles, benefit ⁠system

* More young people report ill health holding them back from ​work

* Employers say higher minimum wage and other costs at fault

* Proposals for change expected later this year (Updates with release of full report, new official data)

LONDON, May ​28 (Reuters) - ‌One in six young people in Britain may find themselves not in employment, education or training (NEETs) within five years, up from one in eight now, according to a new ⁠government-commissioned report that warns of a "lost generation".

In recent decades Britain has had fairly low ⁠youth unemployment by European standards. But since the COVID-19 pandemic, ​the proportion of 16-24 year-olds outside the job market or education has risen to one of the highest in Europe.

The number of NEETs reached its highest since late 2013 in the first quarter of this year at just over 1 million, or 13.5% of the age group, up from 12.5% ​a year ‌earlier, new official figures on Thursday showed.

"Detachment is no longer temporary. For too many young people it is becoming permanent. We are at risk of a lost generation," former health minister Alan Milburn, who led the report, said.

WELFARE SYSTEM 'EXACERBATING INACTIVITY'

Milburn's report blamed the welfare system for "exacerbating inactivity". But it also highlighted a sharp drop in the number of low- and medium-skilled entry-level jobs - including part-time Saturday jobs for schoolchildren - despite buoyancy in the broader labour ​market for much of the past decade.

Six in 10 NEETs have never had a job, up from four in 10 two decades ago. Over ‌70% lack good school grades - though 15% have a university degree - and 44% say poor health limits their ability to work, up from 26% 10 years ago, driven by a rise in mental health problems, ‌learning difficulties and autism.

While the direct cost of NEETs in terms of welfare benefits is £3.2 billion ($4.3 billion) a year, getting them all into work full-time work would boost the economy by £38 billion while the annual cost of foregone growth could be as high as £125 billion if it marked the ​start of a lifetime of joblessness.

Milburn plans to set out detailed policy proposals later this year.

Work and pensions minister Pat McFadden said the report showed "the scale of the challenge ‌and the root causes of youth unemployment we now need to confront".

FEWER OPPORTUNITIES FOR WORK EXPERIENCE

While 84% of NEETs wanted a job or training, only £1 was spent on employment support for every £25 in welfare payments for that age group, the report said.

Work experience opportunities have narrowed or vanished and entry-level ⁠roles are ⁠more demanding than in the past, it added.

British governments have sought to expand apprenticeships, which play ‌a much smaller role than in countries such as Germany or the Netherlands.

The chief executive of retailer Marks & Spencer, Stuart Machin, said the report's findings were "shocking but not surprising" and matched ​the concerns of his staff and ​customers.

Many employers blame higher employment costs including a minimum wage which has risen sharply as successive ‌governments sought to lift it to two thirds of median earnings, with the biggest rises for younger workers.

"When the cost of entry-level labour rises, the case for taking on someone inexperienced becomes harder unless employers are given support to offset the risk," the report said, although it noted disagreement that the minimum wage was to blame.

Marks & Spencer