Chancellor George Osborne must include measures in the Budget in March to address youth unemployment and training, says the British Chambers of Commerce.
The business group is calling for a £100m scheme to encourage companies to hire the jobless young or apprentices.
The BCC is also calling for tax incentives to encourage investment in young entrepreneurs.
There are currently almost 920,000 young unemployed people in the UK.
The unemployment rate for 16 to 24-year-olds is 19.9%, according to figures released by the Office for National Statistics last week.
The total number of jobless people is 2.34 million - or 7.2%.
"If the chancellor wants to avoid a lost generation among today's 16 to 24-year-olds, he must use the spring Budget to help business take on and train up young people," said BCC director general John Longworth.
He added that the government should not wait until after the next general election, scheduled for May next year.
'Promote investment'
"The crisis of confidence separating Britain's employers and young people can't wait for political posturing or the electoral cycle," said Mr Longworth.
"Getting young people into employment is vital, pressing and easily affordable right now."
The BCC said young people were almost three times more likely to be unemployed than members of the workforce as a whole.
It said concrete measures were needed to promote business investment in youth.
It is proposing a £100m "future workforce grant" scheme, which could offer £1,000 grants to businesses that take on young workers.
The group is also calling on Mr Osborne to extend by two years the apprenticeships grant for employers scheme to help create 800,000 new apprenticeships.
Furthermore, it wants the government to increase tax relief available through the enterprise investment scheme from 30% to 50% for investors in businesses run by people under the age of 24.
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