A poll of UK companies has found that 58% of SMEs are expecting to take on additional staff next year but there is concern about the UK's labour market in the long term.
The annual CBI/Pertemps employment trends survey has found that 51% of firms across the UK will grow their workforce in the year ahead, with confidence highest amongst small and mid-sized firms (58%).
But the findings also show that nearly two-thirds (63%) of business leaders believe that changes in the UK labour market will make Britain a less attractive place to invest and do business over the next five years - up from just 25% in 2015.
Skills gaps are the biggest issue facing firms (cited by 79%). Access to overseas workers is a big contributor to this, with 49% identifying uncertain access to labour supply as a key challenge - up from 35% in 2016.
The survey also shows that companies continue to match inflation pay awards where they can - 52% of respondents aim to raise pay for their employees in line with (or above) inflation in the coming year. However, 63% say they need to take action to cope with rising employment costs, including raising prices (21%), restructuring the business model (20%) and increasing investment in training (32%).
More than nine in ten respondents (93%) say that a diverse and inclusive workforce is important to the future success of their organisation, with 70% introducing or extending flexible working opportunities and 66% investing in training for line managers to help boost inclusion.
Neil Carberry, CBI managing director for people policy, said: "Britain's record on job creation is second to none, and this year's survey shows that this is set to continue in 2018. But with softening economic growth matched with high employment, the survey again emphasises the vital need to make progress on the Industrial Strategy and secure a good Brexit deal to improve productivity, support job creation and boost pay growth."
Tracy Evans, Pertemps Network Group HR and quality director, said: "Although there has been a lot of change in 2017, confidence is high among employers, with most expecting to expand on opportunities in the coming year. One of the big problems we face in recruitment at the moment is the skills gap and how to overcome it. Finding the right staff is obviously key in recruitment and we need to find a solution to this ever-growing problem."