Money set aside for widening access should be used to subsidise internships for all students, according to a major review of the links between business and universities.

The government-commissioned Review of Business-University Collaboration, published on 28 February and led by Sir Tim Wilson, former vice-chancellor of the University of Hertfordshire, says that all undergraduates should be offered a “structured, university-approved” internship to make them more employable.

Professor Wilson said that such internships would normally last for 10 to 12 weeks. In the case of PhD students and postdoctoral researchers, the report recommends placements of eight to 12 weeks.

If companies do not pay for internships, the report says, universities should support undergraduates financially to take them up – rather than allowing them to be the privilege of the wealthy. They would do so using money they had agreed with the Office for Fair Access to spend on activities including outreach work and financial support for poorer students.

Offa money should “support eligible students rather than condone a policy that could inhibit social mobility”, the review says.

At a press conference to launch the report, Professor Wilson said that the question of how many unpaid internships would be subsidised by the sector was “an issue between the universities and Offa”.

David Willetts, the universities and science minister, said the report was a reminder that it was a “legitimate use of excess money to help undergraduates with the cost of internships”.

Professor Wilson said he knew of no data on what proportion of internships are paid.

Asked whether he thought it was right that undergraduates should work for free, he said that “one side of me says definitely not, but there’s a pragmatism here that there are certain industries where unpaid internships are the norm and it’s quite difficult to move away from that”.

At current rates, it would cost a university £2,092 to pay an 18- to 20-year-old student the national minimum wage for 12 35-hour weeks. This sum would not cover expenses or accommodation during the internship.

Universities currently set aside around £1,980 for Offa priorities per student, assuming they pay the average fee of £8,509 over a three-year course.

Stephen Caddick, vice-provost for enterprise at University College London, said he welcomed the review, but added that he “wouldn’t have been able to afford to do an unpaid internship” as a student because he needed to earn money in the holidays.

And concerns have been raised that unpaid internships are illegal under the UK’s minimum wage law.

A spokeswoman for Offa recognised that funded internships could boost social mobility.

“However, we would encourage universities, the professions and skills organisations to consider the parts they can play … including the appropriate balance of funding,” she added.

The review also recommends boosting the number of sandwich courses by changing student number controls, although how this would work in practice in England would be up to the Higher Education Funding Council for England, Professor Wilson said.

A year in industry should have a maximum fee of £1,000 and interest charges on loans should be suspended during the year to prevent students being put off by more debt, the Wilson report recommends.

The creation of “distinctive” Key Information Sets for postgraduates should also be a “priority development” for Hefce, the report states.

KIS are being introduced in the autumn for undergraduates and cover areas including student satisfaction and future salary data.

Mark Fuller, director of communications at the 1994 Group, welcomed the proposals for undergraduate internships, but cautioned that “setting arbitrary fee limits for sandwich courses could restrict the resources available to deliver” them.

The University Alliance said it “particularly” welcomed incentives for sandwich courses.