Under 25s feel the brunt of recession as unemployment hits 14-year high

Britain faces losing a generation to unemployment after figures showed half the jobs lost over the past year were those of youngsters, pushing up the UK's youth joblessness rate to the highest in Europe.

As the data showed that all the progress on jobs since Labour came to power in 1997 had now reversed, the Tories attacked the government's record and urged it to do more to help the young find work, education or training.

"These are shocking figures and a damning indictment of Labour's neglect of young people," said the shadow work and pensions secretary, Theresa May. "Youth unemployment has been growing for years under Labour and Gordon Brown's recession will only make things worse.

"If Gordon Brown really wants to help people in the recession, he should stop dithering and adopt our proposals to provide 100,000 more employee-led apprenticeships and set up a fund to help young people who are not in education, employment or training."

The business secretary, Lord Mandelson, called the figures unacceptable, while the work and pensions minister, Angela Eagle, said: "Young people have been heavily affected by the economic slowdown and we are determined to provide extra help and support so we don't lose a generation to long-term unemployment.

"Last month we announced the first set of successful bids which will create 47,000 new jobs, and our Backing Young Britain campaign will bring business and government together to create thousands of new opportunities for young people."

Official data showed that unemployment jumped by 220,000 in the three months to June to a 14-year high of almost 2.5 million - a jobless rate of 7.8%.

There was a rise of more than 50,000 in the number of the under-25s without work to a total of 928,000 in June, fuelling the fears of a "lost generation".

The Prince's Trust said that about half of these were able to claim unemployment benefit, which was now costing the government £3.4m a day. "But this is just the start of a long and downward spiral, which all too often leads to crime, homelessness or worse," said Martina Milburn, the charity's chief executive. "Only by stopping young people falling out of the system can we rescue this lost potential and save the economy billions each year."

The figures also showed that of the fall of nearly 600,000 in the number of jobs in the economy in the past year, more than half were among the under-25s. And figures from the EU statistics body, Eurostat, showed Britain's youth unemployment level outstripping that of Germany, France and other European countries.

Professor David Blanchflower, who was until recently a member of the Bank of England's monetary policy committee and has long warned of a surge in unemployment and youth joblessness in particular, said the total out of work could easily rise by another million to 3.5 million.

"Unemployment is going to increase for many more months to come. Mandelson, Brown and Darling face a daunting task. Yesterday's numbers amount to a very cold shower. There is a huge amount more to do," he writes in today's Guardian.

The bad figures were accompanied by a warning from the Bank of England governor, Mervyn King, that any economic recovery could be "slow and protracted" - a signal that the Bank is prepared to leave interest rates at record lows for a long time and to pump even more money into the economy than the £175bn already announced. Presenting the Bank's quarterly assessment of the economy, King also again attacked the banks for their key role in triggering a deep recession that has pushed many companies into bankruptcy and people into unemployment.

The Office for National Statistics also reported a relatively small rise of 25,000 in the number of people claiming jobseeker's allowance. Under that measure, there are now 1.58 million people claiming benefit, 4.9% of the workforce - the highest rate since October 1997. There is widespread suspicion among experts that the claimant count does not represent the true state of joblessness as many unemployed people are unable to claim benefit.

Analysts at the Institute for Fiscal Studies said they expected the rises in the claimant count to speed up in autumn.

Describing the figures as "ghastly", Howard Archer, chief UK and European economist at IHS Global Insight, said he suspected the International Labour Organisation measure of unemployment (the number of jobless people wanting, available, and actively seeking work) "is painting a truer picture of the labour market" than the much narrower measure of people eligible to claim benefit.

There was some better news yesterday, however, as the supermarket group Morrison's said it would create 2,000 jobs.