Graduates without a top-level degree pass will see their chances of getting a job this summer almost vanish, it was forecast today.

With record numbers seeking employment, the vast majority of employers are closing the door to any candidates with lower than a 2:1 degree pass.

Experts reckon around 500,000 graduates will be seeking a job this summer. The 420,000-strong class of 2010 will be competing against thousands left unemployed as a result of the recession from last year's graduates and some who have been without a job for two years.

They are facing a situation where 69 candidates on average are chasing every job – up from only 31 two years ago.

As a result of the jobs squeeze, nearly eight out of 10 employers (78 per cent) have slapped a ban on employing anyone without a 2:1 degree – up from 66 per cent last year.

In addition, the number of employers insisting on taking only candidates from a select band of universities, ie the Russell Group – which represents 20 of the country's leading higher education research institutions such as Oxford and Cambridge – has almost trebled in a year from 2.5 per cent to 6.9 per cent.

Research by the Association of Graduate Recruiters (AGR) shows employers have been besieged by 686,660 applications from graduates – with more than 40,000 who failed to find a job last year and even the year before competing with this year's pool for employment.

In addition, employers' predictions that the drop in vacancies last year would be halted this summer have proved wrong. The figures show that, while the number of vacancies has fallen by 6.9 per cent this year compared with 8.9 per cent the previous year, the jobs market is still plummeting.

As a result, employers are finding that on average there are 69 applications for every job, a rise of 20 since last year and more than double the corresponding figure for 2008 (31).

Student leaders and lecturers warned that the jobs situation would get worse as public spending cuts begin to bite.

Video: Tough times: the graduate job market

Aaron Porter, president of the National Union of Students, said: "Graduates are leaving our universities with world-class skills and knowledge and have the ambition to make important contributions in the UK.

"We are concerned that the savage cuts to the public sector will create further unemployment and will make the lives of graduates tougher in an already difficult jobs market. Graduates will be the engines of our economic recovery and the Government must invest in creating the jobs and training opportunities so that this exceptional pool of talent does not stagnate."

Sally Hunt, general secretary of the University and College Union, said that this year's graduates were already leaving university with record levels of debt. She warned that ministers could not justify attempts to raise student fees by citing "specious graduate pay premiums" in the light of the research.

A committee of inquiry into student finance, headed by Lord Browne, is scheduled to report this autumn.

The AGR research paints a bleaker picture than a similar survey published earlier this year.

"Employers' early predictions for this year's recruitment season have turned out to be somewhat premature in their optimism and today's findings suggest the recovery is going to be slower than previously thought," said Carl Gilleard, the chief executive of the AGR.

"Recruiters are under intense pressure this year dealing with a huge number of applications from graduates for a diminishing pool of jobs."

He warned that a strict adherence to a policy of recruiting people with top-level degree passes "can rule out promising candidates with the right work skills unnecessarily".

"We are encouraging our members to look beyond the degree classification when narrowing down the field of candidates to manageable proportions."

On pay, the average graduate starting salary has been frozen for the second year in succession at £25,000 – the first time in the history of collating statistics that this has happened.

The sectors facing the biggest drop in vacancies include fast-moving consumer goods – ie supermarket and consumer electronic goods (down 45.4 per cent), IT and retail (both down 31.4 per cent). Sectors seeing a rise in vacancies include banking and financial services (up 72 per cent after a massive collapse last year) and insurance (up 53.3 per cent).

One telecommunications company told researchers: "Everything has taken longer to loosen up so people aren't starting big projects and employers aren't taking on so many staff."

An engineering company added: "I would assume that there is an increase in applications because a lot of graduates did not get a job last year or even the year before."

However, David Willetts, the Higher Education minister, said: "The job market remains challenging for new graduates as it does for others.

"But a degree is still a good investment in the long term and graduates have a key role to play in helping Britain out of the recession."

Dr Wendy Piatt, director general of the Russell Group, added: "Graduates face an extremely competitive employment market. However, a degree remains a valuable investment.

"Russell Group universities are constantly striving to ensure their students develop skill-sets that make them employable, entrepreneurial and experienced. Because of this, Russell Group graduates are among the most sought-after worldwide."

The survey, which took in 199 of the country's largest graduate recruiters, revealed that – between them – they were offering a total of 17,920 graduate jobs this summer, 6.9 per cent fewer than they were offering last year.

Joss Reed: 'It's a really difficult time to be graduating'

The 20-year-old graduated with a 2.2 degree in physics from Leeds University this June. He decided to take a master's in automotive engineering because he wanted to improve his job prospects and was concerned a 2.2 would stop him getting a job.

He said: "I hope that if I do well in my master's the fact I got a 2.2 will matter less. I probably didn't put as much effort into my degree as I could have done. I bucked up my ideas in my third year but the course was hard. A lot of my friends found it difficult too but most of them managed to get 2.1s."

He added: "I lived with eight people at university and only two of them have jobs. The others are all doing gap years, master's or PGCEs in the hope there will be more jobs out there in a year's time. It is a really difficult time to be graduating and very worrying.

"I had hoped that by taking a master's I would be at an advantage and the job market might have improved. But I'm concerned that if more people are taking master's then many others will have one by the time I finish."

Tash Mupasai: 'It was pointless to keep applying for jobs'

Aged 23, she graduated with a 2.2 degree in physics from Manchester University in 2009. She felt forced into taking a master's after several recruiters told her they would only take on graduates with a 2.1 or a 1st. Ms Mupasai decided to do her master's in photon science – the study of how light interacts with matter – as she felt studying a specialist subject would make her more employable. But she is still concerned at the state of the job market.

"I applied for several jobs after my first degree but many of the jobs either specified that only people with a 2.1 or better could apply or the employers told me they preferred another candidate who had a 2.1. It was pointless to keep applying... So I decided to do a master's in the hope that the job market would be better by the time I finished."

Ms Mupasai added that a friend who got a 2.2 from Manchester University had been unable to find a graduate job. Instead she was working at a bar. "It's really hard and several of my friends are finding it really difficult to get work. Many of my friends, even those with 2.1s, are having to resort to working part-time in bars or shops. It's really demoralising for them to have worked hard for a degree and still to be unemployed. I am very concerned that the situation might be the same for me even after I graduate with a master's."

Jack Milner, 22: 'The fact I got a 2:2 has really affected my job prospects'

After graduating from the University of Central Lancashire with a 2.2 in business studies this May, and applying for 50 to 60 jobs, he has only had three interviews and is still unemployed.

"I think the fact I got a 2.2 has really affected my job prospects. I didn't think it would matter because I have done lots of work experience. As soon as employers see that I got a 2.2 they disregard my CV," he said. "I did a whole year's work placement in recruitment so you would think that would count for something. I'm applying for a broad range of jobs from marketing, to HR to retail, but have had no success so far.

"But I'm also finding myself in a Catch 22 situation. On the one hand, I'm finding it hard to get employers interested in me because I have a 2.2. On the other, when I apply for entry-level jobs, I'm told I have too much work experience.