Boris Johnson has been told to make job creation and skills training for young people a top priority as the UK recovers from the economic impact of the current crisis.
Leading business group CBI warned that unemployment was the biggest threat to livelihoods, saying it should not be allowed to scar communities.
It published a series of proposals, including transforming job centres into new “Job & Skills Hubs”, investing in the green economy, and a time-limited scrappage scheme to incentivise use of electric vehicles.
In a letter to the Prime Minister, CBI director general Dame Carolyn Fairbairn said: “Amidst all the uncertainty, one thing is clear: the UK will only build back fast and better through a market-driven plan that supports sustainable growth.
“Dynamic enterprise is the only way to unleash the potential of our country and get ahead.
“A world class test and trace system is the foundation for a UK that is safe to visit, invest in, work and study in. Two other priorities also stand out: jobs, especially for young people, and investment.
“Redundancies will rise fast over the autumn as support schemes, especially the jobs retention scheme, wind down. Past recessions show the impact of joblessness is deeply uneven.
“Without immediate intervention, pre-crisis inequalities across regions, gender and race will worsen. Long-term unemployment will leave generational scars.
“Smart, fast policy is needed now to accelerate the process to minimise the human cost and in particular protect the futures of our young people.”
It comes after the Organisation for Economic Co-operation and Development warned that the UK economy is set to be the hardest hit by coronavirus among the world’s developed countries.
In its latest global economic outlook, the OECD predicted Britain’s economy was likely to slump by 11.5 per cent in 2020.
The OECD warned that if there was a second peak of the Covid-19 pandemic, the UK economy could contract by 14 per cent this year.
It is understood the UK is likely to hit hard because the economy relies so heavily on the services sector. The sector makes up 80 per cent of the UK’s economic activity.
The OECD’s UK forecasts also warned that the Government’s furlough scheme would “probably not be able to fully offset lasting effects on employment”.
At the same time there are growing worries over the UK’s relationship with Europe and the rest of the world. The UK has not yet signed a free trade agreement with the EU and as a result could be subject to WTO trade tariffs.
The body expects the world economy to contract by 6 per cent, with all countries suffering a deep recession and cautioned that the recovery will be slow.
A double-hit scenario where there is a second wave of Covid-19 would see global GDP drop by 7.6 per cent and the recovery would be even slower next year, added the OECD.