Funding Gap Analysis: The Impact of Reduced Investment in Youth Economic Inclusion

As Northern Ireland navigates the transition from European Social Fund (ESF) support to the UK Shared Prosperity Fund (UKSPF), serious concerns have emerged about potential funding gaps and the consequences of reduced investment in youth economic inclusion programmes. This analysis examines the scale of these funding challenges, the potential impact on vulnerable young people, and the economic case for sustained investment in effective youth employability interventions.

The Scale of ESF Investment

The European Social Fund has represented a substantial and consistent investment in Northern Ireland’s skills and employability ecosystem:

The ESF Programme 2014-2020 had a total value of approximately €450 million (£383 million)
The EU contribution was €210.5 million (£179 million), representing 40% of programme costs
The remaining funding came from match funding through government departments and other sources
Under Priority 1 and 2, focused on those furthest from the labour market, the budget was approximately £177 million
This supported 66 projects delivered by 50 organisations across Northern Ireland

This substantial, multi-annual funding enabled a comprehensive infrastructure of support for economically inactive young people and those facing complex barriers to employment.

The Transition to UKSPF

The UK Shared Prosperity Fund has been positioned as the successor to EU structural funds, including ESF. However, the transition raises significant concerns:

The total UK-wide UKSPF allocation is £2.6 billion over three years (2022-2025)
This represents a significant reduction compared to the EU structural funds it replaces, which provided approximately £1.5 billion annually across the UK
Northern Ireland’s total UKSPF allocation is £127 million over three years
The UKSPF funding for Northern Ireland is dramatically lower than ESF, with UKSPF providing only £42 million over two years compared to ESF’s £40 million annually
While the UK government has committed to eventually matching previous EU funding levels, the current allocations fall significantly short
The People and Skills investment priority, most relevant to former ESF activities, cannot be accessed until 2024/25 in most areas
In April 2024, £22.6 million of Northern Ireland’s UKSPF budget was reallocated to the NI Executive, raising concerns about the loss of targeted support for economic inclusion

This creates a clear funding gap both in terms of overall investment levels and timing, with the risk of significant disruption to essential services.

Interim Measures and Bridging Arrangements

Several interim measures have been implemented to address the immediate funding gap:

A one-year extension to existing ESF projects was provided to March 2023
The UK Community Renewal Fund (UKCRF) offered £220 million of pilot funding across the UK in 2021/22
In February 2025, the UK Government agreed to transition funding for April 2025-March 2026 across 16 projects totaling £25.7 million
UKSPF confirmed funding for 18 projects (15 of which are led by voluntary and community sector organizations) from April 2023-March 2024
Some Department for Economy and Department for Communities programmes have provided short-term continuity funding for certain projects

While valuable, these measures have been characterized by short-term planning horizons, reduced funding levels, and uncertainty—all of which undermine the stability required for effective work with vulnerable young people. With UKSPF funding set to expire in March 2026 and no confirmed successor program, the sector faces another potential funding cliff-edge.

The Scale of Need versus Available Resources

Persistent Economic Inactivity

Northern Ireland continues to face persistent challenges with economic inactivity, particularly among young people:

The economic inactivity rate in Northern Ireland stands at 27% (as of early 2025), consistently the highest inactivity rate in the UK
This has been a long-standing structural issue, with economic inactivity rates remaining stubbornly above 25% for most of the past decade
While recent data shows some welcome upward turn in employment rates, this does not necessarily translate to positive outcomes for the most vulnerable young people
For the period July to September 2022, there were an estimated 17,000 young people aged 16-24 in Northern Ireland who were NEET (Not in Education, Employment or Training), equivalent to 8.8% of all those aged 16-24 years
Of these 17,000 young people, 11,000 were estimated to be not in employment, education or training and economically inactive (not looking for work and/or not available to start)

The scale and persistence of this challenge demands sustained and increased investment rather than reduction, particularly as those furthest from the labour market risk being left further behind as more work-ready individuals secure the available opportunities.

The Gap Between Need and Resources

Analysis of the current funding trajectory reveals a substantial gap between identified need and available resources:

ESF funding supported approximately 77,000 participants through Priority 1 and 2 over the 2014-2020 period
At current UKSPF allocation levels, provision will need to be significantly reduced in terms of:

Number of participants supported
Intensity of support provided
Geographical coverage
Length of interventions

This funding gap means that many vulnerable young people will be unable to access the support they need, at precisely the time when economic pressures are increasing and barriers to employment are becoming more complex.

Economic Impact Analysis of Youth Disengagement

The financial consequences of failing to invest adequately in youth economic inclusion are substantial:

Immediate Fiscal Costs

Each young person who is NEET represents an approximate annual cost to the exchequer of £12,000 through benefits, lost tax revenue, and other direct costs
For Northern Ireland’s current 26,000 NEET young people, this represents an annual cost of approximately £312 million
These direct costs are substantially higher than the investment required for effective intervention programmes

Long-term Economic Impact

The long-term economic costs are even more significant:

Lifetime Earnings Gap: Young people who experience extended periods of unemployment or inactivity face a permanent ‘wage scar’ estimated at 13-21% lower earnings throughout their career
Productivity Loss: Disengaged young people represent lost productive potential for the Northern Ireland economy, estimated at £250 million annually
Healthcare Costs: Economic inactivity is associated with poorer health outcomes, generating additional healthcare costs estimated at £42 million annually
Social Services Costs: Increased demand for social services among disengaged young people and their families adds approximately £27 million in annual costs
Criminal Justice Costs: Young people disengaged from education and employment are at higher risk of involvement with the justice system, generating criminal justice costs of approximately £35 million annually

Research by the Ulster University Economic Policy Centre found that “transitioning groups currently excluded from the labour market into employment is the most effective method to reduce poverty and create inclusive prosperity.” Failing to make this investment represents not just a social failing but an economic one.

Specific Northern Ireland Context

The economic impact of youth disengagement in Northern Ireland has distinctive features compared to other UK regions:

The legacy of conflict has contributed to higher rates of mental health issues, increasing barriers to employment for many young people
Economic inactivity is concentrated in specific geographical areas, creating persistent intergenerational worklessness in certain communities
The smaller size of the Northern Ireland economy means that the impact of youth disengagement is proportionally greater
The post-Brexit economic adjustment creates additional challenges for youth employment, particularly in border communities

As the Joseph Rowntree Foundation has noted, Northern Ireland has “higher worklessness and lower employment than elsewhere,” making investment in youth economic inclusion particularly critical for addressing poverty and disadvantage.

Return on Investment Calculations

Analysis of youth employability programmes, including those delivered through ESF and the YouthStart pilot, demonstrates a strong return on investment:

YouthStart Pilot ROI

The YouthStart pilot project evaluation showed:

A unit cost of £2,111 per participant, well below the projected cost of £2,500
Progression rates of 94.4% into employment, education or volunteering (118 out of 125 participants)
Qualification achievement rates of 96% (120 out of 125 participants)

When compared with the annual £12,000 cost per NEET young person, the economic case for investment is compelling—an investment of £2,111 generating immediate savings of £12,000, plus long-term economic benefits through increased earnings, tax contributions, and reduced service demands.

Wider ESF Programme ROI

The broader ESF programme demonstrated similarly strong returns:

Conversion rates of 31% of unemployed participants into employment
24% of economically inactive participants into employment
44% of NEET young people into education or training

The Grant Thornton evaluation of ESF in Northern Ireland concluded that ESF projects provided “better value for money than was required by the MA [Managing Authority],” with an average unit cost of £2,091 per participant for youth projects.

Preventative Value

Perhaps most significantly, effective youth employability interventions have preventative value that generates substantial long-term savings:

Preventing a young person from becoming long-term NEET saves approximately £72,000 in lifetime costs to public services
Early intervention with at-risk young people significantly reduces later demands on mental health services, criminal justice, and social care
Supporting young people from families with intergenerational worklessness can break cycles of dependency that span generations
Building the skills base of young people generates long-term economic benefits through increased productivity and innovation

The Impact of Funding Reduction on Service Delivery

Funding gaps and reductions have immediate impacts on the organisational capacity and expertise within the youth employability sector:

Staff Retention Challenges: Uncertainty and short-term funding lead to increased staff turnover and loss of experienced practitioners
Reduced Training and Development: Limited resources mean less investment in workforce development, reducing service quality
Organisational Sustainability Risks: Without funding certainty, over 50 organisations face service reductions or closures
Loss of Institutional Knowledge: Decades of experience and practice wisdom can be lost if organisations cannot sustain their work
Wider Financial Pressures: Increased costs linked to both the Cost of Living crisis and increased Employer Contributions are further compounding the financial challenges faced by organisations

A survey of ESF-funded youth employability providers indicated that 68% have already experienced staff losses due to funding uncertainty, with 42% reporting that they have had to reduce service provision as a result. The Northern Ireland Council for Voluntary Action (NICVA) Economic Inactivity Coalition has highlighted significant financial instability, job losses, and gaps in long-term funding planning as a direct result of reduced funds for UKSPF delivery.

Service Coverage and Quality

Reduced funding inevitably affects the coverage and quality of support available:

Geographical Gaps: Rural areas and smaller communities are often the first to lose services when funding contracts
Reduced Intensity: Support becomes less intensive and personalised, reducing effectiveness for those with complex needs
Shorter Interventions: Programme durations shorten, limiting the potential for sustainable progress
Narrowed Focus: Holistic support elements may be sacrificed to focus on core employment outcomes

YouthStart partners report that under reduced funding scenarios, they would be forced to reduce their support from the current 2,387 young people to approximately 1,600—leaving almost 800 vulnerable young people without access to vital services.

Impact on Young People

The human cost of these funding gaps falls most heavily on the most vulnerable young people:

Those with multiple, complex barriers may find themselves without appropriate support
Progress made by current participants may be disrupted or reversed
Young people in transition between services may fall through widening gaps in provision
Trust built with marginalised communities may be damaged by service withdrawal
Over 10,900 beneficiaries are at risk of losing vital support when UKSPF funding ends in March 2026
The end of Multiply funding (supporting numeracy skills development) in March 2025 has further reduced available support
Without adequate alternatives in place, pressures on public sector services will be compounded

As one YouthStart participant powerfully stated: “This programme is vital for quality of life. It helps people find their path… This has helped me get my own life back.”

Case for Sustained Investment

The case for sustained investment in youth economic inclusion is compelling from multiple perspectives:

Economic Case

Strong return on investment with both immediate and long-term economic benefits
Contribution to addressing Northern Ireland’s persistent economic inactivity challenges
Building human capital for a more competitive, productive economy
Reducing fiscal pressure through preventative intervention

Social Case

Breaking cycles of intergenerational disadvantage
Promoting social cohesion and community resilience
Supporting post-conflict reconciliation through shared economic opportunity
Addressing inequality and social exclusion

Delivery Model Case

The youth work approach has demonstrated particular effectiveness with those furthest from the labour market
Partnership models like YouthStart provide efficient, high-impact service delivery
A developed infrastructure of experienced providers exists, ready to scale with appropriate investment
Innovative approaches piloted through UKCRF can be mainstreamed and expanded

Financial Sustainability Through Cross-Departmental Investment

A more sustainable funding model for youth economic inclusion would recognise the cross-departmental benefits of effective intervention:

Department for Economy: Benefits through increased economic activity, skills development, and productivity
Department for Communities: Benefits through reduced welfare dependency and increased social inclusion
Department of Health: Benefits through improved mental health outcomes and reduced service demand
Department of Justice: Benefits through reduced offending and reoffending rates
Department of Education: Benefits through increased educational engagement and achievement

By pooling resources across departments based on shared outcomes, more sustainable funding models could be developed that recognise the true value of youth employability interventions.

Recommendations for Addressing the Funding Gap

Immediate Actions

To address the immediate funding gap and prevent service disruption:

Bridge Funding Allocation: Establish an immediate bridge funding programme to maintain capacity until full UKSPF implementation
Continuity Guarantees: Provide continuity guarantees for proven high-performing services to prevent loss of expertise
Accelerated UKSPF Timeline: Bring forward access to the People and Skills strand of UKSPF to prevent service gaps
Maximise Match Funding: Develop creative approaches to match funding that leverage resources across departments

Medium-Term Strategic Approach

For a more sustainable funding landscape in the medium term:

Outcomes-Based Investment: Develop outcomes-based investment models that reward providers for achieving sustainable positive change
Cross-Departmental Pooled Budget: Create a cross-departmental pooled budget for youth economic inclusion based on shared outcome measures
Multi-Annual Funding Commitments: Shift from short-term funding cycles to multi-year funding commitments to enable service stability and strategic planning
Invest in Prevention: Allocate specific funding for preventative work with at-risk young people to reduce future demand
Scale Proven Models: Invest in scaling the YouthStart partnership model across Northern Ireland, building on demonstrated success
UK-NI Government Coordination: Enhance collaboration between UK and NI governments to ensure smooth funding transitions
Voluntary Sector Involvement: Ensure voluntary organizations are actively involved in co-designing a post-UKSPF programme with a governance structure that includes VCS representation in funding decisions
Ring-Fenced Funding: Establish ring-fenced funding for VCS-led delivery, ensuring resources are not diverted elsewhere

Long-Term Systemic Change

For long-term sustainability and effectiveness:

Mainstream Youth Work Approaches: Formally recognise and mainstream youth work as a key strand in Northern Ireland’s skills system
Develop an Economic Inclusion Strategy: Create a comprehensive strategy for economic inclusion that spans traditional departmental boundaries
Build Sustainable Cross-Sector Partnerships: Foster long-term partnerships between youth work organisations, education providers, employers, and public services
Invest in Impact Measurement: Develop sophisticated approaches to measuring impact and social return on investment to strengthen the evidence base
Create Programme Governance Structures: Ensure that any new funding programme includes voluntary and community sector representation in governance and decision-making processes
Align with NI Policy Frameworks: Ensure new programme priorities align with existing NI policy frameworks in education, health, and employment
Support Diverse Groups: Ensure that investment targets and supports those furthest from the labour market including women, young people, people with disabilities, carers, those involved in the criminal justice system and ethnically minoritised groups

Conclusion: The Cost of Inaction vs. The Value of Investment

The analysis presented here demonstrates that reduced investment in youth economic inclusion is a false economy. The short-term savings achieved through funding reductions are far outweighed by the long-term costs of youth disengagement, both in fiscal terms and in human potential.

Northern Ireland stands at a crossroads. With the right investment approach, building on the proven success of youth work models like YouthStart, it can address its persistent economic inactivity challenges and unlock the potential of its young people. Without this investment, it risks entrenching disadvantage, wasting talent, and increasing long-term costs across public services.

As we navigate the transition from ESF to UKSPF, the evidence calls for not just maintaining but strengthening our investment in youth economic inclusion. The return—in economic terms, in social cohesion, and in human flourishing—will far exceed the cost.

Recommendations for the next phase of UKSPF Implementation

What makes these outcomes particularly significant is that YouthStart deliberately focuses on young people who face the greatest barriers to employment. The programme prioritises those with:

Low or no qualifications
Poor mental health and wellbeing
Complex life circumstances (homelessness, family breakdown, poverty)
Experience of care or criminal justice systems
Addiction issues
Limited work experience or confidence

For many participants, YouthStart represents their first positive experience with education or employment support after years of disengagement. The youth work approach creates an environment where they can overcome personal barriers before focusing on employment skills—a necessary sequence that mainstream provision often fails to accommodate.

As the UK Shared Prosperity Fund (UKSPF) develops its strategy for supporting economic inclusion in Northern Ireland, YouthStart advocates for four key recommendations based on its evidence of impact:

Broad definition of economic inactivity – UKSPF should adopt an inclusive definition that encompasses those not in education, training, or employment, enabling more comprehensive support programmes.
Recognition of youth work as a key fourth strand—Youth work organisations should be formally recognised as a complementary strand alongside schools, colleges, and training organisations, particularly effective for the hardest-to-reach young people.
Defined relationships with Labour Market Partnerships – Clearer frameworks would enable youth work organisations to support councils in improving economic activity rates in their areas.
Regional and local delivery capacity—Maintaining the ability to work across Northern Ireland while providing locally tailored support ensures equal opportunities for all young people.

By incorporating these recommendations, the UKSPF can build on the proven success of the youth work approach pioneered by YouthStart, ensuring that young people furthest from the labour market are not left behind in Northern Ireland’s economic future.

The YouthStart model demonstrates that even the most disengaged young people can find pathways to employment, education, and a more positive future with the right approach. As one participant succinctly said, “This programme is a lifeline to young people. It has changed people’s lives.”

If you want to read more about Youth Start, review any of our partner’s sites:

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