Media playback is unsupported on your device Media caption Iain Duncan Smith: "We have to ensure that our immigration system works in the interests of Britain"

Work and Pensions Secretary Iain Duncan Smith has urged UK businesses to "give a chance" to unemployed young Britons, rather than relying on foreign workers.

In a speech in Spain he said a "realistic promise" of work formed part of the government's "contract" with the British people.

Business groups said firms needed the "best people" and migrants often had a better work ethic and skills.

And Labour said what was needed was "proper action" rather than talk.

Under European Union labour laws, most EU citizens can work in the UK without restriction.

The government has introduced a cap on the number of skilled workers from outside the EU, in an effort to reduce net migration from about 200,000 a year to the "tens of thousands".

In a speech to the Spanish Foundation for Analysis and Social Studies in Madrid, Mr Duncan Smith said that more than half of newly filled jobs in the last year were taken by foreign nationals.

'Vulnerable group'

He warned that there is a "serious risk" that British people will not benefit as the economy recovers if firms "look elsewhere" for workers.

"If we do not get this right then we risk leaving more British citizens out of work, and the most vulnerable group who will be the most affected are young people," he said.

EMPLOYMENT RULES Most citizens of EU countries, as well as Switzerland, face no restrictions on working in the UK

Bulgarian and Romanian nationals need authorisation to work, with some exceptions

British firms are not allowed to discriminate against non-UK nationals from the EU over terms of employment, pay and working conditions

There is a 21,700 annual cap on the number of skilled non-EU workers allowed into UK

A points-based system is used to determine which skilled non-EU workers can enter UK

The cap excludes employees transferred by companies from abroad

"But government cannot do it all. As we work hard to break welfare dependency and get young people ready for the labour market, we need businesses to give them a chance, and not just fall back on labour from abroad."

He said that while immigration played a "vital role" in helping bridge skills gaps, there were many foreign nationals in low-skilled or semi-skilled jobs that could easily be done by unemployed Britons.

"We have to ensure that our immigration system works in the interests of Britain, enabling us to make a realistic promise to our young school leavers," he said.

He said the immigration system must give unemployed people "a level playing field."

In 2007, then Prime Minister Gordon Brown pledged to create "British jobs for British workers" - but the Conservatives said that was illegal under EU law. Official figures suggested that most of the new jobs created since 1997 had gone to people who were not born in the UK.

The unemployment rate among 16 to 24-year-olds fell by 79,000 to 895,000 in the three months to this April but youth unemployment rates still stand at above 19%.

Labour say, after a year in his job, Mr Duncan Smith "should stop talking and start delivering".

'Great tragedy'

I do not think it is the role of employers to discriminate on that basis, it is the role of employers to take on the best person for the job Andrew Cave, Federation of Small Businesses Business leaders defend hiring migrants

Shadow work and pensions secretary Liam Byrne told the BBC his party would increase taxes on bank bonuses to help pay for new work opportunities for 60,000 young people and reverse cuts to Border Agency staff which he said created the conditions for "illegal immigration to flourish".

"There are simply not enough jobs because the government is cutting back too far and too fast," he added.

"The great tragedy of all of this is that young people lose the habits of work and we as taxpayers have to pick up the bill."

Mr Duncan Smith was backed by Migrationwatch chairman Sir Andrew Green, who said he was "absolutely right".

"Employers have a responsibility to give young British workers a chance and the government must get a grip of immigration if they are to avoid abandoning a whole generation of young Britons on the dole."

'Glib'

But Andrew Cave, from the Federation of Small Businesses, told the BBC it was "quite a glib, throwaway political comment" from the minister.

He said for decades governments had removed links between the education system and business - and school leavers often did not have the skills or training needed.

"If you are an EU citizen you have a right to work here. If an employer discriminates against somebody on the basis of their nationality, and they are from within the EU, they could end up in legal deep water.

He added: "I do not think it is the role of employers to discriminate on that basis, it is the role of employers to take on the best person for the job."

Director General of the British Chambers of Commerce, David Frost, told BBC Radio 4's Today programme that employers needed the "best people".

"They expect young people to come forward to them who are able to read, write, communicate and have a strong work ethic and too often that's not the case," he said.

And Habib Rahman, of the Joint Council for the Welfare of Immigrants, said Mr Duncan Smith was issuing "a disingenuous and populist call for tighter immigration laws, when his perceived problem is from an area the UK government is powerless to affect - EU immigration."