A dearth of skills is restricting growth, according to a survey by the Institute of Directors.

It wants the Government to scale back business taxes and employment regulation so that firms have more resources to invest in training.

IoD regional chairman John Rider said the position was even worse in the West Midlands.

"The main thing for us is the lack of net new jobs - that is by far the biggest issue."

Miles Templeman, director-general of the IoD, said: "It is disturbing that at a time of economic weakness, the growth of the private sector is being compromised by skills shortages. Businesses want to invest in training and are doing so on a large scale already, but they would invest even more if the Government took some radical steps to deliver a better overall business environment.

"Excessive employment regulation and an uncompetitive tax system effectively eat up resources that businesses could use to fund training. The Government needs to put more emphasis on sorting out these problems if it wants to tackle skills shortages."

A total 58 per cent of employers reported that skills gaps were hurting the growth of their firms.

This resulted in higher operational costs, compromised quality, lost orders, stifled innovation and increased workloads for other employees.