Town hall chiefs have warned a third of all young people will be out of work or ‘underemployed' by 2018.

A report commissioned by Local Government Association from the Centre for Economic and Social Inclusion claims 2.5m young people are struggling to find work across England and Wales.

Of those 2.5m young people, there are 1.25m not working but want to, 760,000 who are in work but want to work more and 425,000 not working to their full potential, including graduates working in non-graduate jobs.

According to the report, urban areas outside London, such as Sheffield, Leeds and Manchester, are the worst hit by youth unemployment, while rural areas are suffering from underemployment.

Cllr Peter Box, chairman of the LGA's economy and transport board, said: ‘It is simply unacceptable that we expect a third of young people to be underemployed in 2018 and it would be a travesty if young people were being left behind when the rest of the economy is growing and benefitting from this.

'We know how successful local organisations, such as councils, businesses and education providers, can be when working together and we would urge the government to use this to its advantage and give us a say in the schemes that are aiming to get young people into work,' added Cllr Box.