The percentage of UK firms looking to recruit in both the manufacturing and services sector improved, however the number of those struggling to recruit also rose, according to the latest quarterly economic survey from the British Chambers of Commerce.

The survey, based on the responses of more than 6,000 businesses, suggests that UK economic conditions remain sluggish, despite a modest improvement in activity in the second quarter of 2018.

“Amid growing international uncertainty, from escalating trade disputes to oil price rises, the UK economy continues to grow at a sluggish rate,” Adam Marshall, Director General of the British Chambers of Commerce (BCC), said. “Brexit is a key factor – but long-standing structural issues are also holding companies’ growth back.”

“The availability of skilled staff remains the biggest issue that firms face,” Marshall said. “Unless the government gets a handle on the disarray in the training and apprenticeship system and sets out a clear immigration policy that enables firms to cover vacancies, the economic potential of many areas across the UK will continue to be held back.

Marshall suggested that scrapping the Tier 2 visa cap would be a “swift and powerful statement of intent.”

Meanwhile, BCC’s survey also showed the number of businesses reporting that they are intending to invest fell in the quarter, and business confidence for both manufacturing and services also fell. The biggest concern for businesses continues to be the difficulties they face when trying to access skills, with the percentage of firms reporting problems rising.

In the manufacturing sector, the percentage of firms looking to recruit jumped from 67% to 77%, but the number of those struggling to recruit also rose, to 71%.

The balance of firms in the manufacturing sector reporting improved domestic sales rose in the quarter, from +17 to +22, and the balance of firms reporting improved orders increased to the highest level since Q1 2015 (from +16 to +22). However, the size of the sector means that its contribution to UK growth remains limited. Confidence that turnover will improve over the next twelve months eased slightly from +48% to +47% Confidence that profitability will improve over the next twelve months held steady at +35%.

In the services sector, the percentage of firms looking to recruit rose from 50% to 60%, but the number of those struggling to recruit also rose to 63% (from 60%). The balance of firms reporting increased domestic sales rose from +20 to +23, while the balance reporting improved domestic orders fell slightly from +16 to +15.

According to the BCC, all this shows the economy is in a holding pattern, with annual economic growth this year set to be the lowest since the financial crisis.

 The BCC calls for a push to fix the fundamentals for business, fixing the crisis-hit training system, improving connectivity, delivering infrastructure improvements, and incentivizing investment to create a “Brexit hedge” for the economy.