Businesses in London struggling to meet their skills needs are increasingly looking overseas for both graduates and lower-skilled staff, according to the CBI and KPMG.

Results from the London Business Survey show that two out of three firms in the capital (65%) expect to be troubled by skills shortages over the next six months, and the majority (58%) are already recruiting from overseas to fill gaps.

Almost a third (29%) of those turning overseas said they were increasing their recruitment from outside the UK and, contrary to the perception that overseas workers often perform low-skilled jobs, 83% are bringing in those with higher, degree-level skills.

The survey revealed that whilst 57% of respondents thought that London's talent pool was one of its leading assets in business success, 24% warned that a lack of suitable skills was a top threat to London's overall competitiveness.

John Cridland, CBI deputy director-general, said: "London is still a star economic performer, but its skills problems could become its undoing. Shortages are being felt across many disciplines and at all levels - from the fundamentals of the shop floor right up to top leadership.

"London businesses tell us that a shortage of UK applicants means they often have no choice but to recruit foreign workers for lower-skilled positions in areas such as catering and transport.

"When it comes to graduates there is far more choice, but many employers are choosing foreign graduates over British applicants because they are of a higher quality and are more employable.

"British graduates are competing in the job market with a topslice of talent from overseas universities. To remain attractive to employers UK graduates need better careers advice and stronger employability skills in areas like teamworking and communication."

Ian Barlow, London Senior Partner at KPMG, said: "It concerns me to see the continuing skills shortages and for so much of this to need to be filled from abroad.

"While I welcome talent from everywhere, and it is important that businesses in London have access to skilled labour from abroad, there is so much that needs to be done to upskill our own Londoners to enable them to compete for these jobs.

"It's economically wasteful and morally wrong for there to be so many unemployed people in the capital when there are so many jobs to fill."

Key employability skills like teamworking, communication and a positive attitude were cited by 40% of bosses as a major skills constraint. 39% said that a lack of technical skills is a bottleneck, while 33% pointed to a shortage of managerial skills - up from 22% in March 2006.

Demand for graduates is set to increase, with 68% of employers expecting their higher level skills needs to grow. By contrast, while 21% said they will need more people with skills at GCSE level, 30% said they will need less.

Barlow added: "This survey clearly demonstrates how much employers value basic and employability skills in preference to just qualifications. This points the way to how the education and skills agenda needs to be redirected under the leadership of the business led London Employment and Skills Board."

Business leaders in the survey said that to improve the capital's home-grown talent, the London Skills and Employment Board, which is business-led and advises the Mayor on his education strategy, must strengthen the quality of careers guidance to young people.

Over a third (37%) of businesses in the capital recruiting from abroad say that they are "reliant" on workers from Eastern or Central Europe. 47% said they are reliant on staff from the rest of the EU, and 46% described themselves as reliant on staff from outside the EU.