Britain is crying out for green skills – yet government policy is making it more expensive for employers to hire the very graduates needed to deliver net zero, growth and infrastructure renewal.
The Environmental Industries Association (EIA) today warns that rising employment taxes are actively locking graduates out of work at the exact moment the UK faces a deepening green skills shortage. While ministers talk up green jobs and economic growth, environmental services and clean technology businesses say higher Employer National Insurance Contributions (NICs) are forcing them to pause recruitment, delay graduate intakes and rethink entry‑level roles.
Graduate unemployment rising – despite skills shortages
The unemployment rate for recent graduates has risen to around 6%, up from 5% the previous year, according to the latest Higher Education Statistics Agency and Department for Education data. This comes against a backdrop of an overall UK unemployment rate of 4.9%, indicating that graduates are finding it harder – not easier – to enter the jobs market.
This trend is particularly troubling for the environmental sector, which is facing a well‑documented and growing shortage of skilled workers. Industry analysis suggests the UK is short of around 200,000 people with green and environmental skills, a gap that threatens delivery of net‑zero targets and major infrastructure programmes.
The EIA identifies three key drivers behind rising graduate unemployment:
- Rising cost of employment
From April 2025, the rate of Employer National Insurance Contributions rose from 13.8% to 15%, while the threshold at which employers begin paying NICs fell sharply from £9,100 to £5,000 per employee. Economic modelling suggests these changes could result in up to 55,000 fewer jobs nationally and a measurable increase in unemployment as firms absorb higher labour costs. - Recruitment freezes hitting SMEs hardest
Small and medium‑sized enterprises, which dominate the environmental services and clean technology sector, are particularly exposed. Surveys and labour‑market analysis show many businesses have responded to higher NICs by scaling back hiring plans, freezing graduate roles or shifting to short‑term contracts to limit employment costs. - A widening gap between skills demand and hiring capacity
While demand for green skills is accelerating, 63% of environmental professionals report a shortage of suitably skilled applicants, and financial constraints are cited as a major barrier to recruitment and training. In other words, the sector needs graduates – but is being priced out of employing them.
A policy contradiction at the heart of green growth
The warning comes despite strong evidence that green job demand is growing faster than the wider labour market. Green job adverts increased even as the overall jobs market contracted, highlighting a major missed opportunity to connect graduates with future‑facing employment.
Michael Lunn, CEO of the Environmental Industries Association, said:
“The UK is facing a clear policy contradiction. We have graduates looking for work, businesses desperate for skills, and a net‑zero agenda that depends on both – yet government policy is making it more expensive to bring them together. Rising Employer National Insurance Contributions are a direct deterrent to hiring graduates. If ministers are serious about growth, green jobs and long‑term productivity, they must reduce the cost of employment and stop pricing the next generation out of work.”
The EIA is calling on government to take urgent, targeted action:
- Reduce or zero‑rate Employer NICs for graduate hires
Introduce time‑limited NICs relief for employers hiring graduates into environmental services and clean technology roles, directly lowering the cost barrier to entry‑level recruitment. - Launch a Green Graduate Employment Programme
Create a co‑funded programme to support paid graduate placements across waste, water, land based services, circular economy, climate adaptation and environmental technology businesses, sharing training costs between government and industry. - Align skills funding with real environmental sector demand
Refocus skills and innovation funding on employer‑led partnerships with universities and colleges, ensuring graduates leave with practical, job‑ready skills aligned to the fastest‑growing environmental roles.