British businesses are planning a surge in the number of graduates they hire this year, in the latest signal of rising confidence and an improving UK economy.

Employers expect to hire 18% more graduates in 2014, up from the modest improvement of 4.3% in 2013 – with the finance sector planning to be the most aggressive recruiter as it increases intake by 42%.

The bullish projections are contained within the latest annual report into graduate pay and progression from employment researcher Incomes Data Services, and provide a long-awaited fillip for graduates who have been struggling in a brutally competitive market since the financial crisis. The report also revealed there were 60 applications for every vacancy in 2013, compared with 49 in 2011, while experts predict that many unemployed graduates will now be disadvantaged in the long term.

Nasreen Rahman, assistant editor at IDS, said: "Recruitment prospects for this year's crop of graduates look brighter than they have for a long while as the number of job opportunities is set to rise sharply. Some sectors such as finance appear to be making up for lost time, aiming to recruit several times more graduates in 2014 than they did in 2013."

The news follows similar research published at the end of last month by the jobs search engine Adzuna.co.uk, which claimed that graduate vacancies in May had soared by 37% year on year.

However, while recruitment may be picking up, the IDS research shows the increased activity has failed to translate into higher graduate starting salaries: 57% of employers froze graduate starting salaries again last year, continuing a trend from the start of the recession; 65% have not increased their rates for 2014.

The stagnation of graduate salaries is seen as an indication that the supply of graduates remains high. Simon Baddeley, senior divisional director at recruitment firm Reed, added: "In recent years, graduates with one, two, or even more years under their belt having worked in a range of roles, sometimes outside of their chosen discipline, have ensured that the market remained competitive – keeping wage inflation low."

However, it is newer graduates that are most likely to initially benefit from rising recruitment.

John Philpott, a director at independent employment analyst the JobsEconomist, added: "Employers will now do two things. First, mop up the most recent graduates as their education is pretty fresh. Second, go through the backlog of people who have graduated in the past four to five years, and see who has been doing non-graduate jobs.

"Those graduates who are most likely to experience problems are those who have graduated in, or returned to, areas of high unemployment, as well as those who come from less privileged backgrounds and are less likely to have the contacts to get internships. Those of the kind of groups likely to experience a long term penalty."

A Treasury spokesman said the survey was another sign that the economy was improving. He said: "Every extra young person in work means a brighter future and more economic security for them and their family."

IDS's research also found that the finance sector, in particular, was finally looking to hire again, with graduate recruitment in financial services expected to increase by 42% this summer, following a fall of 3% in 2013. The manufacturing and service sectors were also bullish, with both expecting to increase their graduate recruitment by 22%. It further showed that internships had grown in popularity and offered average pay of £17,500.

While the overall figures are improving, there remain large numbers of young people out of work across Europe. According to figures released last month by Eurostat, the statistics division of the European commission, 20.2% of 15-24-year-olds are unemployed in the UK, compared with 58.1% in Greece, 54.8% in Spain, 27.2% in Ireland and 7.7% in Germany.