CBI warns of skills shortages amid improvement in manufacturing growth

Growth among smaller manufacturing firms has picked up in recent months, but skills shortages have hit a near 30-year high, a new report says.

A survey by the CBI found new orders for small and medium-sized (SME) companies increased at the fastest pace since 1995.

A further acceleration of output growth is expected in the next three months, the poll of over 330 firms showed.

The CBI said concerns over a shortage of skilled workers have "ramped up", with the number of SMEs citing skilled labour as likely to hit output, rising to its highest since 1989.

Alpesh Paleja, CBI principal economist, said: "Growth is going strong for SME manufacturers, who are reaping the benefits of a lower pound and buoyant global growth, as seen in record expectations for export orders growth.

"But margins are clearly still under pressure, with cost pressures high, and firms expect to raise prices further to regain some ground.

"Furthermore, concerns over skill shortages have rocketed, stoking capacity pressures further.

"This underlies the importance of establishing a future immigration system that provides companies with access to talent and labour. The building blocks of a new system that meets economic needs and public concerns must start with scrapping the net migration target, which has never been fit for purpose."

Two out of five firms said they were working below capacity, the lowest since 1989.