Liverpool University has opened a Pounds 2 million graduate employment unit using Pounds 770,000 funding from the European Commission on urban regeneration and the rest from private companies and training and enterprise councils.

The Graduate into Employment Unit, staffed by 15 training and business experts, will enable 350 graduates per year to train for a placement in business development projects in Merseyside-based small and medium-sized enterprises.

It follows Liverpool's successful graduate training scheme under which 1,250 students got placements over the past five years.

About 90 per cent of these have found permanent employment in the region, and half of these have settled in jobs created as a direct result of the placements.

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The demand for places is expected to be high. The previous scheme attracted five applications for every six-month placement. But it is hoped that a wider pool of employers will be encouraged to take on graduates.

Some 1,000 companies have already been associated with the scheme, and the total is expected to rise to 5,000, one-fifth of the firms on Merseyside.

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The unit, which will be based in the Merseyside Innovation Centre, is the first step in a wider initiative called Graduates for Merseyside.

This is a consortium comprising Liverpool City Council, Merseyside TEC, the government office for Merseyside, the Liverpool City of Learning, as well as the city's three higher education institutions.

The aim of the consortium is to keep talented graduates in Merseyside and to stimulate the growth of small businesses by using graduates as a resource.

Corporate affairs minister Jonathan Evans said: "The initiative shows a benefit in channelling part of the region's intellectual capital towards small and medium-sized enterprises - the sector which lies at the heart of our economy - at a time when graduates face increased competition in securing employment in traditional areas such as larger, blue chip companies."

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