The IT skills shortage in the UK is real - and is affecting the growth rate of high-tech business start-ups, according to figures from PriceWaterhouseCoopers. This trend is evident throughout Europe, they say.

The fear is that the lack of skills is halving the number of start-ups, compared with what they would be if there were sufficient IT skilled staff. The growth rate for the last year is 34.5 per cent, as calculated by PWC. That's ten per cent above the year before, but all the predictions were that annual growth rates should be up to 70%.

Over 70% of the companies questioned had experienced 'severe difficulties' recruiting staff with key IT skills and experience. And most companies expect the situation to deteriorate further over the next few years.

Pay rises above inflation and extra benefit packages were all now seen as vital to attract and retain staff. However even these incentives would not improve the situation sufficiently and companies are increasingly looking outside the EU to fill vacancies.

Meanwhile, the UK government's plan to speed up the issue of visas for skilled IT immigrants, 'fast tracking' them in just one week, has come under fire from both contractor and industry representatives.

The recently announced scheme is one of a number of proposals aimed at combating the worsening skills shortage. However, contractors argue that in the long term this measure could worsen the skills crisis, by using cheaper foreign labour and discouraging companies from investing in quality IT training. It may also depress salaries and rates, which would then make the jobs even less attractive to UK nationals.

Ann Swain, CEO of recruitment agency association ATSCo, agrees: "The IT industry needs to invest in training UK employees from other sectors - bringing people in from abroad is a short-term sticking plaster solution to the IT skills shortage."

The Department for Education and Employment said in response to the criticisms: "IT workers recruited from abroad on work permits are expected to be paid the market rate for the job in the UK. Where there is evidence that a resident worker will be displaced or excluded by recruiting someone from abroad the work permit application will be refused."