Britain's businesses urgently need investment in skills training to keep ahead of competitors, according to Digby Jones, director general of the CBI.

Speaking at a conference supported by London Society of Chartered Accountants' (LSCA), he said investment in adult education would mean employers were able to recruit qualified employees quicker and increase productivity.

"Britain, for all its prosperity is the worst for literacy skills in Europe," he said. "Latvia is better than us. We must push for investment in skills training nearly two in every three of London businesses are struggling to find the right staff, with some sectors suffering from the worst recruitment problems for over five years.

"But for all this, the quality of higher management is the best on earth. We need to invest in the training of middle management because these are the people that push business forward. We need to bully Government to create a tax regime to stimulate demand and encourage smaller businesses to train their employees. Business needs skills," he said.

Jones said that the April Budget should encourage enterprise. Further details on a training tax credit are expected to be announced.

Howard Gross, president of the LSCA, said: "More must be done to help bring training and skills to people in the workplace with agencies working closer together to ensure that people have the right skills and qualities for the vacancies on offer. It is only through developing the workforce that Britain, and in particular London, whose outstanding expertise is in great demand, will Britain be able to retain its pre-eminence on the world stage."