A lack of work skills is contributing to a youth unemployment crisis across the European Union that could create a “lost generation”, according to a major new report.

The EU has the highest youth unemployment rate of any region in the world apart from the Middle East and North Africa, with almost a quarter of young people under 25 out of work in 2013.

A report published today by global management consultants McKinsey surveyed young people, education providers and employers across eight EU countries, including the UK, and found a severe skills mismatch.

It warns that the three groups exist in “parallel universes” and do not understand one another.

One third of employers surveyed said that a lack of skills is causing them major business problems, while 61 per cent said that they were not confident they could find enough applicants with the right skills to meet their needs.

Too many students are not mastering the basics, the report warns, with employers reporting a particular shortage of “soft” skills such as spoken communications and a lack of work ethic.

The disconnect is stark; while 74 per cent of education providers said they were confident their graduates were prepared for work, only 38 per cent of youth and 35 per cent of employers agreed.

Outside of Germany and the UK, only 50 per cent of employers said that they regularly interacted with education providers.

There are barriers for students at every step of the journey from education to work, the report states, with cost and lack of information cited as major reasons for students not enrolling in post-secondary education such as college or university.

There is also a “social bias” against vocational education that stops young people enrolling on vocational courses, despite most viewing it as more helpful to finding work than an academic path.

Meanwhile, support systems to help young people secure jobs are inconsistently available.

The report says that the EU has a critical role to play in improving the situation by developing systems to share information about employment trends and by working to make vocational qualifications transferable across borders.

Chris Jones, chief executive of UK vocational education body City & Guilds, said the report reinforced many of the concerns that have been raised in recent years.

“What was of most interest was the juxtaposition of where education providers thought their graduates were in terms of employability against the views of employers and graduates themselves,” he said.

“That shows not enough is being done to continually contextualise learning to the work environment.

“In 14-19 education in the UK there are plenty of opportunities for employers to engage and support students and help them develop work skills and instil in them a work ethic. Those are things that can be taught, but it’s a question of how and when they are introduced.”