Almost 10 per cent of small firms avoid recruiting graduates, according to research published by the Department for Education and Employment.
Many employers believe that graduates lack work experience, have unrealistic wage expectations and become rapidly dissatisfied with their jobs, a report from Sheffield Hallam University's Policy Research Centre has found.
Small and medium-sized enterprises, defined as firms with fewer than 250 employees, still lag behind larger firms in graduate recruitment, the report said. In SMEs, 8 per cent of employees hold degrees, compared with a 13 per cent average among the economically active population.
Employers said that while graduates and non-graduates require the same degree of on-the-job training, non-graduates are cheaper, have lower expectations, have more work experience and are likely to remain with the company longer. Of firms which took on graduates, many complained that graduate standards were declining. But the report said that the traditional frosty relationship between higher education and small firms was changing.
One third of firms which had not recruited graduates recognised potential benefits. They believed that graduates may bring new ideas, specialist skills and a higher level of knowledge to the company.
The report also found that small firms want incentives from the government to recruit graduates, and they believe that universities and their graduates should make more effort to understand them.
The report's authors, Helen Williams and Glyn Owen, call for a better flow of information between higher education and small firms. They said that recruitment information should be more closely targeted.
Their research identified a strong "graduate culture", where firms that already had graduates in the workforce were much more likely to employ graduates.
They also found a narrow geographical corridor, running from London to Manchester, within which firms were much more likely to recruit graduates than firms outside. Attention to graduate recruitment should be focused on areas outside this band, the authors said.
The paper also found that firms in the financial, business services and manufacturing sectors were much more likely to recruit graduates than firms in other areas.
The researchers surveyed more than 1,000 firms with fewer than 250 employees from all sectors and regions, and interviewed over 200 employers face-to-face.