The UK government is set to introduce a new funding scheme aimed at tackling youth unemployment.

The scheme aims to encourage businesses to hire more young workers, a move that could offer some support to sectors such as retail that have historically relied on younger employees.

Under the proposals, businesses will receive a £3,000 grant for every person aged between 18 and 24 they hire who has been searching for work for six months or more. Small and medium-sized businesses will also be offered £2,000 for each new apprentice they take on.

The new Youth Jobs Grant, backed by £1bn in government funding, aims to create around 200,000 jobs and is expected to support roughly 60,000 young people.

Work and Pensions Secretary Pat McFadden is set to formally announce the initiative on Monday.

He said the programme would deliver “life-changing opportunities to young people” and help reverse the rise in those not currently in education, employment or training.

“We are focusing funding where it’s needed most and giving employers the flexibility and support they’ve asked for,” McFadden said.

The scheme will also expand an existing jobs guarantee that offers young people a six-month job if they have been claiming Universal Credit and searching for work for 18 months.

The guarantee will now apply to those aged up to 24, rather than the current upper limit of 21.

Prime Minister Keir Starmer said the reforms would help close the skills gap and support more young people into meaningful employment.

“These reforms underpin our ambition to create an economy that works for everyone,” he said.

The announcement comes as the number of young people not in education, employment or training (commonly referred to as NEETs) has approached one million, according to recent data.

For the retail sector, which remains the UK’s largest private sector employer, the measures could offer some relief amid mounting employment pressures.

According to the British Retail Consortium, retail employment on central high streets has fallen by almost a fifth between 2015 and 2024, while jobs in shopping centres have dropped by nearly a third over the same period.

Helen Dickinson, chief executive of the British Retail Consortium, warned that rising operational costs were making it harder for retailers to sustain employment opportunities.

“Britain’s high streets are under strain, and the loss of employment opportunities makes that impossible to ignore,” she said.

“Retail remains the UK’s largest private sector employer and businesses want to keep investing in high streets, creating opportunities for young people entering the workforce and supporting local economies.”

However, Dickinson added that employment costs alone rose by more than £5bn last year, placing further strain on retailers already grappling with challenging trading conditions.

Sign up here to get the latest grocery and food news each morning