Nearly 40,000 people lost their jobs in the last three months in the West Midlands, as the region continued to be the worst hit area for job losses in England.

And the region needs to act now or risks creating a “lost generation” of unemployed youths, business leaders have warned.

Nationally, the number of unemployed rose to its highest ever level under the New Labour government, with 2.4 million people out of work. Unemployment in the UK is now at its highest level since the summer of 1995.

Between April and June this year, unemployment in the West Midlands rose by 15.8 per cent, the sharpest rise in the country, as the region’s economy continued to be buffeted by heavy losses in the manufacturing sector.

In June, Birmingham van maker LDV made more than 800 people redundant after the firm collapsed. And the sector as a whole has seen a steady stream of people either being forced out or choosing to leave as companies were forced to tighten their belts because of the massive drop in consumer confidence.

There are now 285,000 people unemployed in the West Midlands, more than one in ten of the entire workfore.

Only Scotland saw a bigger rise in unemployment between April and June than the West Midlands. And the number of people claiming jobseekers allowance rose to a 12-year high, up to 1.58 million after an increase of 24,900.

The number of people out of work for more than a year also showed a hike, with an increase of 36,000 leaving the level at 543,000, an 11-year high.

And the Bank of England warned that any recovery over the next year would be “slow and protracted” even if it did arrive.

James Watkins, executive director of the West Midlands Business Council, called on the Government to help key regional businesses by a short-term subsidy, topping-up wages.

He added: “We strongly believe there is a lot more the Government can do to mitigate this rise in unemployment.”

Youth unemployment was also by the downturn, as 46,000 more lost out to put the total at 722,000.

Business leaders in Birmingham said it was crucial the Government acted over youth unemployment, saying it was worried about the recession potentially creating a “lost generation” of unemployed youths.

Birmingham Chamber of Commerce and Industry said unemployment in Birmingham on its own now stood at 12.3 per cent of the working age population, well above the national average and well above that of other “core” cities.

Policy advisor Kiran Virk said: “Worryingly, national youth unemployment has risen again this quarter by 46,000 to 722,000.

“Although expected, these figures emphasise the extremely difficult economic conditions and the Government must do more to ensure that we don’t lose the enthusiasm of our newly graduated students.”

Birmingham Chamber said it was working with private sector employers in the city who have pledged to create nearly 450 job placements, demonstrating the appetite of the business sector to play a part in providing job opportunities.

The City Region, a public-private sector partnership, has successfully bid and won £40 million from the recently announced Government Future Jobs Fund and through its partnership will raise another £10 million which will create up to 6,000 jobs in the West Midlands.

Ms Virk added: “This scheme as well as the West Midlands Graduate Internship Programme will provide hope and vital work experience for young people who need to be recognised as an important asset to the business community.”

Simon Topman, the chairman of the West Midlands Chambers of Commerce, said: “Everything possible is being done in the West Midlands to assist graduates. The West Midlands Graduate Internship programme, supported by the region’s universities, Advantage West Midlands, Jobcentre Plus and business groups like the Chambers of Commerce, will help students start their careers, and businesses will benefit from graduate level skills despite the recession.

“Our region is the first in the country to set up and offer subsidised jobs and training places to graduates with local companies, offering a real opportunity to the 52,000 graduates who are expected to leave the region’s universities in the next few weeks.

“BCI will be working with partners and our members to ensure that as many businesses as possible are involved in this programme.”