The UK will suffer a "lost generation" of young people if more is not done to support employers affected by the Covid-19 pandemic, according to the Federation of Small Businesses (FSB).

The government has created a £2 billion fund to protect and boost job creation for the 16-25 year olds, in an attempt to avoid rapid job losses expected when the Job Retention Scheme ends in October.

Announcing the scheme in the Summer Statement, the Chancellor Rishi Sunak said it would allow employers to claim funding for a six-month work placement for under 25s claiming universal credit. Any business of any size can utilise the scheme, with no limits on the number of individuals offered placements. The kickstart scheme will pay a minimum wage, national insurance and pension contributions for 25 hours a week with an additional £1,500 to set up support and training. Employers can top up pay with their own funds if they choose to.

But the Federation of Small Businesses is warning that the scheme simply doesn't go far enough. The lobby group said a better understanding of the government's plans for apprentices and a focus on technical education were required.

Mike Cherry, the national chairman of the FSB, said: “More must be done to ensure small firms have all the support they need to survive and then thrive after this pandemic.

“If more small businesses are unable to afford an apprentice, without the means to offer an industry placement for T-level pupils or provide a traineeship or kickstart role, we will be letting down the next generation.”