Young men in deprived urban communities see crime as a better career opportunity than the legitimate labour market, ministers have been warned.

Dealing drugs and committing other crimes gives those with little education an opportunity to overcome deprivation and gain wealth and status in their neighbourhoods.

A report on gun crime commissioned by the Home Office warns: “Dealing in illegal drugs appears to significantly underpin the criminal economy in many locations and seems to be instrumental in legitimising crime as a career option for some individuals.

“There are many indications that drug-dealing and other criminality are ‘out-competing’ the legitimate labour market.

“For individuals whose employment prospects are limited by a lack of qualifications, and an existing criminal record, a criminal lifestyle can be seen as an attractive proposition.”

The study found that social pressure to own fashionable clothes and other material goods is driving young people in poor areas to crime, particularly drug-dealing.

Ministers are warned that when drug-dealing establishes a grip on an area, this leads to collective criminal behaviour and young people being drawn into gangland activities.

The 160-page report said that criminal economies were more firmly consolidated in Greater Manchester and Liverpool than in Birmingham, Nottingham and London.

Researchers interviewed 80 offenders serving sentences for firearms crimes and found that the majority aspired to conspicuous material wealth.

Even though the interviewees were in jail, crime was perceived by many to be “a viable career option, enabling material aspirations and social or peer pressures to be realised”.

The report also highlighted the malign effect of young people seeing “successful” criminals living in their neighbourhoods. Pressure to gain material goods was reinforced by “role models” demonstrating the viability of criminal careers that in some cases were more lucrative than working.

The report was produced by the Institute of Criminal Justice Studies at the University of Portsmouth.

Gavin Hales, a senior research fellow and a co-author, said that he did not believe that the criminal economy was more important than the legitimate economy in deprived areas. Most people living in poor city areas were law-abiding, but increasingly more were becoming part of the illegal drugs market.

He said the report’s findings presented a big challenge for the Government in how to educate some young people about the choices they faced. “The criminal economy has very low entry costs and you need no qualifications,” he said.

“It is a cash economy, it offers a degree of instant wealth, instant cash . . . it is an economy that puts a premium on being ‘street smart’.”