Vital confidence has returned to the local business community but skills shortages in the region could prove a cloud on the horizon, a survey has found.

Mirroring similar findings by the Federation of Small Businesses in Kent and Medway, the KPMG South East Business Instincts Survey has found that businesses are gaining in confidence, with 80% expecting to see turnover growth this year, 70% an increase in profitability, and 51% looking to increase their workforce.

This comes on the back of a solid performance in 2012 where 55 per cent of respondents stated they had achieved growth in turnover, and half had increased profitability.

However, 40% felt that greater availability of talent in the region would improve their growth ambitions, and 95% said that holding on to their best people would be their biggest challenge in the year ahead.

Iain Moffatt, chairman of KPMG in the region, believes this is a clear indication that local businesses are in a strong position to move towards growth opportunities, provided the skills shortage is addressed.

He said: “This survey reinforces what I hear from companies across our region - while they are not over confident, they are cautiously optimistic that they are now in a commercially stable position from which to seek out new opportunities.”

But he cautioned that the lack of skilled workers “could prove to be the cloud on the horizon. Recruitment of talent is critical to help generate new ideas and support businesses growth and many local businesses are now looking to make key strategic hires. Availability of this calibre of employee is always a challenge but particularly so whilst skilled people are risk averse in the current economy.

“Employers are struggling to find the skilled candidates they need to prepare for the upturn in the UK economy, while the majority of the unemployed do not have the skills for the jobs that are available. The issue of attracting and recruiting the right people as well as retaining and developing talent within an organisation is fast becoming one of the biggest challenges facing employers across our region.”