Skills shortages are set to be one of the biggest barriers to growth for medium-sized companies in 2005, new research has revealed.

A survey by KPMG and the London Chamber of Commerce of 1,000 middle market businesses in London found that 67% of companies felt that the high costs associated with employing staff and skills shortages in the capital would be their biggest barrier to growth next year.

It follows earlier research reported on TrainingZONE that found that 43% of small and medium-sized enterprises felt their employees had poor standards of education and training.

Ian Hopkinson head of Employment Tax at KPMG said: “Staff costs will be up there as a major issue for middle market companies particularly in London; this is an issue for pretty much all employers.

“This cost will be made up of a number of constituent items such as the direct cash cost of employment, employment taxes and the costs of recruitment and retention, such as training. One of the things that employers are prone to do is to see this as a cost without reference to what they are getting for this and clearly they do need to value staff, especially where their workforce is a skilled one."

Skills and staffing costs were followed by the high cost of business rates, which 52% cited as hindering growth prospects, and London's transport infrastructure at 34%.

Nearly all businesses (93%) surveyed wanted modernising the existing transport system in London should be the Mayor’s priority for London next year.

Elsewhere, the survey also showed that almost two-thirds - 63% - of respondents said that they did not have a business continuity plan in place for the next year and beyond in the event of a major incident or terrorist attack in London.