Britain has the third-highest rate of young people not in work or education among Europe’s richest countries because of rising ill-health and a failing system of benefits and job support, a report has warned.

The Resolution Foundation thinktank said the UK was facing a “crisis” in youth jobs amid a dramatic rise in the number of 16- to 24-year-olds who are not in education, employment or training (Neets) to almost 1 million – the highest level in more than a decade.

It said a “quartet of causes” had led the UK to lose ground against many of its international peers, led by a rise in ill-health among young people, weak vocational education, a hands-off benefits system and a deteriorating jobs market.

Against a backdrop of growing alarm in government about the rise in youth unemployment in the UK, Resolution Foundation said the Neet rate for 18- to 24-year-olds had jumped from 13% in 2019 to 15% in 2025, leaving the UK with 900,000 Neets.

Only Italy and Lithuania had a higher rate out of 22 EU members of the Organisation for Economic Cooperation and Development (OECD) analysed in the report. While some other European countries, including Turkey and Romania, have higher rates, young people in Britain were more likely to be Neet than in comparable rich economies, with a rate higher than that of Germany and Denmark, and more than three times the rate in the Netherlands.

The report comes as Alan Milburn, the former Labour health secretary, explores options for tackling the rise in youth unemployment for a government-commissioned review. Milburn is expected to publish the initial findings of his report later next month.

Ministers have faced sharp criticism from business leaders for driving up UK employment costs, after chancellor Rachel Reeves’s £25bn rise in employer national insurance contributions (NICs), as well as increases in the minimum wage and Labour’s measures to strengthen workplace rights.

The Resolution Foundation said a weaker jobs market had contributed to just over half of the recent rise in Britain’s Neet rate since 2019. However, it said youth unemployment was not unusually high compared with previous economic downturns, suggesting that a lack of job availability due to recent tax changes and minimum wage rises was not the only cause.

The thinktank said the remaining increase was explained by rising ill-health, amid a broader increase in young people reporting health conditions – primarily led by a rise in issues with mental health.

It also singled out the UK benefits system for being distinct from other countries, because large numbers of young people were not given requirements, or support, to engage with work.

Highlighting a rise in the number of 18- to 24-year-old benefit recipients with no requirements to engage with the Department for Work and Pensions from 160,000 to 300,000 since 2019, it said this contrasted sharply with countries with lower Neet rates, where claimants are offered more job support.

Labour has previously pushed to overhaul the benefits system to tackle elevated levels of economic inactivity – when working-age adults are neither in a job or looking for one. However, ministers have faced criticism for prioritising cost savings, as opposed to boosting employment support.

Lindsay Judge, the research director at the Resolution Foundation, said the benefits system in Britain “both expects and provides too little to its claimants”, and required urgent government action to address.

“Fixing Britain’s Neet crisis starts with investment in youth mental health support and vocational education, and a serious rethink of how young people interact with the benefit system. That is how countries like the Netherlands keep their Neet rate a third of ours,” she said.

A government spokesperson said: “Too many young people are locked out of opportunity, work and education – and we are determined to change that by shifting from a welfare state to a working state.

“Backed by £2.5bn, our youth guarantee will deliver a million opportunities across the country, ensuring every young person has the chance to earn or learn, whilst Alan Milburn’s review is investigating the barriers stopping young people from getting into work.

“Alongside this, we are investing £3.5bn to provide tailored employment support for sick or disabled people so everyone can get on in life.”