University graduates who have no job at the end of their courses could be offered modestly-paid internships under a government scheme to help them get a job or new skills.

The proposals, expected next week from the office of John Denham, the universities Minister, will target the 18-24 age group amid fears that graduate recruitment will be hit hard by the recession.

Big companies have already narrowed their search to five elite universities as they cut back on recruitment, while organisers of the annual graduate “milk round” say jobs in finance and retail are drying up.

Companies that have signed up to the Government’s proposals, provisionally called the National Internship Scheme, are understood to include Barclays and Microsoft. They are expected to take on graduates who might otherwise join the growing ranks of the unemployed.

The scheme is being put forward amid a worsening jobs market and increasingly challenging employment prospects for those leaving education.

The most recent labour market survey shows unemployment growing fastest among 18 to 24-year-olds. The figure for young adults was 597,000 in the three months to October 2008 — up 55,000 from the three months to July 2008.

Three million people of all ages are predicted to be out of work by the end of this year and at least 40 per cent, or 1.25m of them, will be under 25. For students in the class of 2009, who can expect to graduate with student debts of up to £20,000, the prospects are increasingly grim. The rapid expansion of higher education, driven by the Government’s target for half of all 18 to 30-year-olds to get a degree, has already left many graduates doing jobs designed for non-graduates.

It is intended that internships will at least improve participants’ skills and experience and may, in some cases, lead to full-time work.

Lasting for up to three months, they will be paid at a rate only slightly higher than undergraduates’ income from grants and loans.

Mr Denham said: “At the end, they will be more employable, and some of them will get jobs. Employers won’t want to let good people go.

“These are the children of the baby-boomers. They will be a very big group. What do we do with them? We can’t just leave people to fend for themselves.”

Reports of the internship follow the announcement this week by the Prime Minister of £140 million to increase the number of public and private apprenticeships by 35,000.

There has been speculation that the Government may bring forward a new requirement for youngsters to remain in education or training until they are 18, which currently applies only to those aged 11 or under this year.

While Mr Denham has not ruled this out, it is hard to see how so many additional education and training places could be created at such short notice.

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