The government should create 5,000 internship places in small businesses to tackle rising graduate unemployment and produce skilled workers for small firms, according to the Federation of Small Businesses (FSB).

The FSB is urging the government to allocate just 10% - £3m - of a £32m pot of money allocated to universities to market and develop internships and jobs within businesses to open up internships to graduates in small firms and create 5,000 extra placements this year.

FSB research shows that more than 20% of small firms would take on a graduate, yet 45% are unaware that they can run internship schemes.

"The government must invest in linking up small businesses and graduates now to prevent graduate unemployment spiralling any further," said John Wright, National Chairman of the FSB.