THE economic recovery is at risk because of growing inflationary pressures and worker shortages, a survey of South West businesses has found.

More than 250 companies took part in Business West’s latest survey of business conditions, with a third reporting that they had increased prices because of rising costs.

In manufacturing, 76 per cent said they were under pressure to raise prices as a result of the soaring costs of raw materials, while more than half voiced alarm at the increasing costs of imports.

Half of respondents expected to increase prices in the next three months, rising to 62 per cent in manufacturing.

Sixty per cent of respondents had tried to recruit in the past three months and 74 per cent of those said they had experienced difficulties in finding the right candidates.

Jon Fletcher, general manager at the Grange at Oborne hotel near Sherborne, said: “I’ve been at this hotel for 18 years and I have never known staff shortages like it.”

Retail, leisure and hospitality are all affected, but labour shortages are hitting the broader services sector hard, with 77 per cent of service sector businesses reporting recruitment difficulties – eight points higher than in the manufacturing sectors.

These figures represent a quarter-on-quarter rise of 11 and 16 points respectively.

Skilled manual or technical and semi or unskilled roles were reported to be the most difficult roles to fill. Business West managing director Phil Smith said: “The third quarter of the year maintains the positive outlook from quarter two, albeit with more moderate results. Businesses in the South West are on the path to economic recovery. Nevertheless, this is not without a set of complex challenges that must be addressed, such as labour market misalignments, skills shortages, inflationary pressures and trade constraints.”