More than a third (34 per cent) of small and medium-sized enterprises (SMEs) took on more staff during the three months to July, a new report from the Confederation of British Industry (CBI) reveals.

Just nine per cent of small firms said their staff numbers dropped during the second quarter of this year, reports In fact, overall, recruitment rose at the fastest rate seen since October 1998, when records began.

This increase in headcount is mostly driven by rising business confidence, as the economy continues to improve. Some 31 per cent of employers reported that they feel better about their business’ position in the economy, while only 11 per cent feel worse than they did three months earlier.

However, the survey also highlighted that 12 per cent of firms are afraid that a lack of available skilled workers might limit their capital expenditure – the highest proportion seen since January last year.

Separate research, from the Institute of Chartered Accountants in England and Wales and Grant Thornton accountants, shows that business confidence actually decreased during the second quarter for the first time in two years, reports The institute believes that this is because companies are preparing for a more gradual and realistic growth after experiencing a strong one.

Scott Barnes, chief executive of Grant Thornton, commented: “Business confidence remains very positive, with growth still relatively strong and the private sector looking to create thousands of jobs.”