Nearly half, or 48%, of UK employers expect to face a shortage of suitable candidates to fill permanent jobs in 2017, according to this month’s JobsOutlook survey by the Recruitment & Employment Confederation (REC).

For the last six months employers have consistently cited engineering and technical jobs as most likely to come up against a skills shortage. The latest report shows that health & social care and construction employers are also expecting to struggle to find people to fill vacancies. With 32% of organisations reporting to have no spare workforce capacity, hiring in these sectors is likely to be under severe pressure in the New Year. A quarter of employers (24%) expect to take on more permanent staff in the next three months.

The latest survey of employers also reveals that business confidence is improving with 30% of employer who feel that economic conditions are improving, up from 27% in the previous rolling quarter. Meanwhile, 38% expect hiring and investment to improve, up from 33% who said the same last month.

Despite these positive trends, business confidence remains lower than before the EU referendum. In the three-month period ending in June, 48% of employers surveyed reported that UK economic conditions were improving, 18 points higher than this month’s score.

“Employers are raising red flags about being unable to fill the jobs they have available,” REC Chief Executive Kevin Green said. “We urge the government to take this issue seriously when considering changes to immigration policy. Limiting access to skills and talent from abroad at a time of severe candidate shortages will risk future prosperity for all.”

“In 2015 UK businesses invested more than £45 billion in training and skills development,” Green said. “While this long-term commitment to upskilling the domestic workforce is vital, there is an immediate need for people from abroad. Employers need the talent, attitude and skills of those who are keen to work to make British businesses and public services successful.

“Across the economy, in high-skill sectors such as engineering and technology and in non-graduate roles in social care, hospitality and construction, employers are already facing labour shortages,” Green said. “This is not a new problem, but if further restrictions are placed on workers from the EU the situation will only get worse. The UK is at near-full employment, and the idea that the domestic labour force could fill all the opportunities available is a non-starter.”