Public sector cuts could reverse patterns of improved graduate retention in cities and regions outside of the south east, which could impede economic recovery, says a new report from The Work Foundation.

The public sector has proportionally more young graduates than the private sector and with new graduate unemployment already at 20 per cent, public sector cuts are likely to increase short term graduate unemployment, the report said. On a longer term basis, this will result in a transfer of young graduates from public sector dependent places in the north to places with stronger private sectors in the south east.

The concentration of graduates aged between 20 and 29 has increased all around the country over the past decade, said The Work Foundation. Yorkshire and Humberside, the north east and the East Midlands and cities such as Leeds, Sheffield and Rotherham experiencing significant rises in numbers of residing graduates. This trend appeared to have been driven by greater public sector demand in the regions during the decade of public sector expansion from 1997.

Young graduates in the north and the midlands are now disproportionately employed in the public sector. This has serious implications for how the government chooses to handle public sector cuts, the report said.

Report author Jonathan Wright said: “The coalition must demonstrate its commitment to rebalancing the economy. High skilled graduates are vital for urban innovation and growth. With the scrapping of schemes such as the Future Jobs Fund, the coalition must now focus on developing strategies aimed at integrating the highly skilled into local private sector jobs.