25 May 2006 | Rebecca Ellinor

Skills shortages in London could be responsible for an increase in offshoring by firms based in the capital, according to the CBI.

The latest London Business Survey, published this month by the CBI and auditing firm KPMG, found 61 per cent of 104 businesses quizzed faced skills shortages, a rise on last year's figure of 49 per cent. It is being felt most by the property, professional services and transport sectors.

The survey found three out of 10 of these companies (29 per cent) have transferred some of their activities offshore or are considering doing so. India is the most popular destination, followed by EU partner countries, China and the Far East.

IT and financial services remain the most popular activities for companies to offshore.

Of firms already offshoring last year, 15 per cent of them were transferring research and development (R&D) work. This has leapt to 34 per cent.

The CBI said this indicates the increasingly sophisticated skills and services on offer overseas, resulting in the proportion of firms moving R&D work overseas doubling in a year.

Sir Digby Jones, CBI director-general, said: "With an increasing pool of graduates in emerging economies and costs often far lower, it is understandable that firms are sending more activity overseas. The skills challenge for the UK is ever more pressing."

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