Half of the firms in the mid-corporate market are finding it difficult to recruit skilled staff, according to a survey by the British Chambers of Commerce. One quarter are having difficulty hiring even unskilled workers.

''These middle-sized firms make up the backbone of the economy and there exists a fear that the skills shortage will lead to a severe decrease in their profits and possibly even result in inflation,'' said David Gallagher, founder and managing director of Prime Time Recruitment Ltd.

Businesses are being forced to pay higher wages to attract and retain competent staff. A survey of independent businesses in Scotland by accountants Price Waterhouse revealed that they expected the greatest inflationary pressure this year to be wages, with 35% of firms identifying this as their greatest concern.

''There are signs that in sectors which are experiencing skills shortages, such as manufacturing and the service sector, wages are rising at faster levels as firms pay more to recruit or retain skilled staff at all levels,'' said Ian Dewar, partner in charge of Price Waterhouse East of Scotland.

One sector which at first sight seemed to have escaped the upward pressure on wages was engineering. Figures from Scottish Engineering for the three months to the end of January showed that companies were reporting average wage settlements of 3.5%.

This suggested that despite nationwide reports of skills shortages in the industry, there had been no significant increase in wages. It followed a period of stability in wage awards over the past five years, with annual figures in that time of around the same level.

''The only explanation I can give for this stability during a period of skill shortages,'' said Scottish Engineering chief executive Howard Jordan, ''is that a number of ad hoc increases has been made to groups of skilled workers which do not show up on the routine wage awards.

''Our survey is based on wage return, not earnings. I have to say, however, that I would expect these payments to cause problems in the next couple of years because they will create distortions in differentials between the different groups of labour.''

Companies are also finding themselves obliged to increase training budgets to bring employees up to an adequate standard. Gallagher pointed to the demands for staff in Scotland's electronics and call centre industries as underlining the need for employers to appreciate transferable skills in potential employees.

''At the same time the rate of recruitment is increasing,'' said Gallagher. ''Nearly one quarter of businesses have taken on new workers over the past six months - this is the largest rise for five years - and a further 20% intend to employ more staff over the summer months.''

With employment levels rising, companies are presented with a much more limited choice of applicant. This is exacerbated by the fact that it is still considered second-rate to leave school to find employment, even if it has structured training, rather than to continue with full-time education.

This is despite evidence that many students drop out of academic courses before they complete them or fail to achieve a high enough grade to continue at the next level.

''School-leavers are not offered satisfactory training,'' said Sharon Tonner, Glasgow manager of Prime Time's commercial division. The ever-increasing trend, she says, is for young people to prefer to take highly paid, high-risk jobs in IT and finance than to move into manufacturing industry.

Martin McKeag, area manager in Scotland, is one of a number of Prime Time managers to argue that the employment and training of younger workers has to be increased. ''One of the reasons for the massive shortage of the normally marketable 30 to 40-year-old band is the lack of apprenticeships undertaken by businesses in the recession of the eighties.''

A growing number of companies are hiring recruitment agencies to train their existing staff. Prime Time, however, also trains its clients' potential candidates before they are selected as well as training the companies' existing employees.

Prime Time will interview candidates at its own or at its clients' offices. Most of the interviewees are unskilled workers and they are assessed for a number of transferable skills, including dexterity, visual recognition, aptitude for repetitive work and attention to detail.

If they are successful they are invited to a course of between three and five days where they are trained in different manufacturing processes and principles. On the last day they are given a practical test in which they have to build certain products within the recognised industry times. The client's quality department inspects the products and decides whether to accept the applicant.

A week of training for an electronics client would, for example, include elements of health and safety, recognition of components such as capacitors, resistors and diodes, fitting the components, soldering exercises, de-soldering and fault finding.

Once a company has recruited the right candidate, though, it is just as important to keep that person fully trained, especially in electronics where there is competition for staff. According to the British Chambers of Commerce survey, 82% of the 110,000 businesses the Chambers represent claim to train their employees.

For 80% of the companies, the training is in the form of on-the-job experience. Apprenticeships, though, are offered by fewer than 20% of businesses. ''It is very important to offer training and experience,'' said Bill Boorman, Prime Time's training manager. ''However, in a skills-short industry, unemployment should not exist. Employers must look at transferable skills that can be used in the applicant's new chosen industry. That is the way forward.''

Gallagher added: ''Change in skills and training can be implemented only from above. Hence a company's management team must themselves be well trained. The increase in the number of companies achieving Investors in People accreditation is encouraging as senior managers are realising the importance of providing their staff with training and development.''