Prospects for the Sussex economy are good but could be dented by a shortage of skilled workers.

That is the picture emerging from bosses who say growth is being stifled because they are unable to find people with the right skills.

Figures from Skills Insight, the South-East-based research unit, showed the region was continuing to enjoy high employment rates despite job losses announced in recent weeks.

The organisation based its research on output, industrial and occupational structure, earnings and house prices.

Its key findings showed the region was close to achieving national learning targets of 50 per cent of adults qualified to NVQ level 3 or higher and 28 per cent qualified to level 4 or higher.

But data from the Basic Skills Agency revealed 22 per cent of the working population in the South-East, aged between 16 and 60, had poor literacy and numeracy skills and was unable to read and write to the standard of an 11-year-old.

Analysis of the public sector had identified skills and recruitment as a critical issue for the region.

A spokesman for Skills Insight said public sector organisations had to deliver services in an area with a high cost of living.

Vacancy levels were running 25 per cent above the national average and there was a sharp increase in retention and recruitment problems.

Skills Insight, however, said there were healthy economic indicators for the South-East, which had the highest employment rate in the UK at 80.3 per cent and a higher rate of skilled managerial employment than the UK average, accounting for 19 per cent of employees.

Banking, finance and insurance service industry companies were significant in terms of jobs concentration, accounting for 23 per cent of employment.

But skill shortages were threatening to stifle growth in all these sectors.

John Parsonage, director of learning and skills at the South- East England Development Agency (Seeda), said: "The rate of change in the workplace and the type of business structures and styles emerging make improving the skills base of people a matter of great importance. We still face some enormous challenges."

Mark Froud, chairman of Skills Insight, said the research raised awareness of the skills issues, which were constraining economic growth in the region.