Action to tackle graduate jobs crisis

Internships to help the 400,000 students leaving university this summer

The UK lost its status as one of the world leaders in producing graduates, according to a league table published today. (PA)

The Government is drawing up plans to head off an unemployment crisis among the 400,000 graduates who will leave university this summer in the middle of a recession.

A package of measures to allow graduates to work as interns in the private or public sector, do voluntary work or stay on at university is expected to be unveiled by John Denham, the Universities and Skills Secretary. Ministers are concerned that many of this year's record number of university leavers will struggle to find jobs.

As a first step, universities and colleges will arrange more than 2,000 internships and work placements for new graduates, mainly with local firms. It is part of a £53m programme designed to combat the recession be announced today, with half the money provided by the Government and the rest by universities, regional development agencies and employers. Some 77 universities and colleges will run projects to help people and businesses through the downturn after their bids were accepted by the Higher Education Funding Council for England. Other measures include training vouchers for the unemployed, advice on looking for work and courses for those on short-time hours.

But some of the opportunities will mean graduates, many of whom will leave university with debts, going further into the red by taking out career development loans of up to £8,000 to finance postgraduate study. The number of loans on offer will triple to 45,000.

Preliminary estimates suggest that the number of vacancies for graduates is likely to be more than 5 per cent lower than last year, the first drop since 2003. The Government will provide more than 30,000 opportunities to give graduates an alternative to signing on.

Mr Denham will announce a scheme under which companies, charities and government departments offer internships. He believes it is much better for graduates to get a "foot in the door" – even if they have to work for relatively low wages – than to become unemployed. As well as gaining useful on-the-job experience, he hopes that many of the interns will land permanent positions when the economy recovers.

David Lammy, the Higher Education minister, said: "It is particularly encouraging to see that over 2,000 internships and work placements with universities and local businesses have been approved, which will be an important part of the Government's proposals to increase the numbers available to students graduating this summer."

Brendan Barber, the TUC's general secretary, welcomed the programme but warned: "The internship scheme must include safeguards to prevent employers exploiting the fund by using taxpayers' money to recruit graduates on the cheap and displace existing workers."

Around 250 graduates will be offered new short-term placements to work on one-off projects in small and medium-sized firms this year, with 500 places available next year. Universities are being encouraged by the Government to offer discounts to existing students who want to stay on. University College London, Exeter and Durham have already announced such plans. Career services for graduates will be extended so they last for three years after they end their studies.

The Government's Office of the Third Sector is drawing up a range of volunteering opportunities, both full and part-time, for graduates who want to gain experience outside a formal workplace.

A recent survey for the National Union of Students (NUS) found that 80 per cent of undergraduates were "concerned" or "very concerned" about their future job prospects. Almost one-third said they were more likely to pursue a postgraduate course as a result of the recession.

Wes Streeting, the NUS president, said: "It is an extremely worrying time for all students, with top-up fees leaving them with record levels of debt."

Despite the gloomy outlook, government officials insist that firms are still taking on graduates in the recession. They believe recruitment rates in the public and voluntary sectors will be higher than among private companies.