Drugs should not be given to depressed children as the initial treatment, the Government's medicine watchdog says today. The advice from the National Institute for Health and Clinical Excellence (Nice) follows safety fears about antidepressants which have been linked with an increased risk of suicide.

At least 40,000 children and young people, aged from five to 16, are estimated to be taking antidepressants, of whom less than 20,000 are receiving psychological therapy, specialists said.

The recommendation, in new guidance issued by Nice, says that antidepressants such as Prozac should be used only when talking therapies had failed, and they should be prescribed only in combination with psychological therapy.

It signals a new drug-free approach to the treatment of depression in young people. GPs have been accused of turning Britain into a "Prozac nation" by over-prescribing antidepressants for mild depression to adults and children in whom the risk of side effects outweigh the benefits. Prescriptions for antidepressants more than doubled in England from 13.2 million in 1995 to 29 million in 2004.

Specialists said that children and young people being treated with antidepressants alone should return to their doctors for assessment.

Professor David Cottrell, a child and adolescent psychiatrist from Leeds, said: "If their symptoms are improving [on drugs] then I would think about leaving them until they had completed six months of treatment. But if they were not doing well then I would definitely think about starting psychological therapy.

"I wouldn't want young people to stop taking their drugs. You have to do this on a case by case basis."

Professor Cottrell, a member of the panel that drew up the Nice guidance, added: "As a practising psychiatrist, even in a specialist centre, I do not commonly use drugs, and certainly not as a first-line treatment. But we often see children referred to us who have not been treated appropriately in the community."

The popularity of drugs such as Prozac and Seroxat, called Selective Serotonin Re-uptake Inhibitors (SSRIs), soared in the 1990s after they were promoted by drug companies as a safer alternative to the older tricyclic antidepressants.

But reports of patients committing suicide days after starting the drugs and suffering withdrawal symptoms when they stopped taking them prompted the largest ever safety review of the SSRIs by the UK Committee on Safety of Medicines.

That review found no evidence of increased risk of suicide in people taking SSRIs but said that they had been over-prescribed in cases of mild depression which could have been treated with therapy or simple advice on sleep and exercise.

It banned the use of all SSRIs in children under 18 except Prozac on the grounds that Prozac was the only drug for which there was evidence of effectiveness in the age group.

Specialists on the Nice panel said 40,000 children aged five to 11 (1 per cent of the age group) and 120,000 adolescents aged 11 to 18 (3 per cent) suffered depression in any one year, and the incidence was increasing. Almost one in three of those affected went on to have significant long-term problems in later life.

"No other illness arguably damages so many children so seriously," said Professor Peter Fonagy, professor of psychoanalysis and chairman of the panel.

"There is every indicator that depression scars the child for later life, not only psychologically but chemically and physiologically. So it is important to intervene early with psychological treatments."

Tim Kendall, joint director of the National Collaborating Centre for Mental Health, said: "The evidence supporting [psychological] treatments is robust and it is vital that the NHS provides psychological therapies to ensure everyone who needs these treatments can access them rapidly."

The health department had pledged to provide an extra 6,000 therapists for the NHS over the next five years but it was not clear how many of these would be available to treat children, he said.