Skills shortages are at a 12-year peak, according to the Business in Britain survey from Lloyds TSB Corporate.

Over half (52%) of the companies who responded said they had faced sustained difficulty in recruiting skilled staff in the last year – the highest level since the survey began.

Across the sectors, finding skilled employees is a problem for 60% of the respondent businesses in retail, transport and communications, and construction – the highest figures across all industries.

The survey also showed a slight cooling of demand for staff. Despite 49% of respondents anticipating an increase in turnover over the first half of 2005, only 25% said they expected to take on more staff compared to 28% in the previous year.

Staffing is also lower on the investment agenda than equipment and machinery, with 27% of respondents expecting to increase their capital investment over the first half of 2005.

Peter Navin, banking director at Lloyds TSB Corporate, said: "A skilled workforce is integral to business success. Tax breaks and a favourable economic climate are only part of the picture. Because of the tight labour market, finding the right person for the job remains a challenge.

"Thanks to its general stability, Britain remains an attractive and profitable place to do business, but we need to ensure our workforce can compete globally, in terms of its level of expertise. Traditional employment pulls such as wages and benefits packages help maintain a competitive edge. By continuing to invest in management, training and resources, we can wage the war for talent with confidence."