The Federation of Small Businesses (FSB) has urged the Government to extend a “highly successful” graduate internship scheme to help rising youth unemployment.

The programme, due to end next month,had supported paid internships in small firms for 8,500 graduates since it was launched in February 2010 say the FSB.

At least 5,000 new internship placements would cost the Government £8 million, but this would be more than offset by reduced benefit payments and increases in taxes paid by those offered permanent work afterwards.

FSB chairman John Walker said, "The current graduate internship scheme has proved highly successful, with some interns going on to start their own companies and others being offered full-time positions with the business they interned for."

"The investment needed to keep the scheme going would be more than outweighed by the contribution that the Treasury would see in reduced benefits payments and the increased tax take from those that gain employment as a result of the internship."

"The UK's young people are the future of the economy, yet we are seeing youth unemployment approaching one million. It is time that the Government invested into this vital sector so that we don't see a generation of youngsters consigned to the dole queue."