Because of skills shortages, employers are lowering their expectations when recruiting people and cutting back on capacity and quality levels

Chris Humphries

It indicates that a quarter of adults are "functionally innumerate", and that one in three have less than five GCSE exam passes.

And it says employers believe almost two million of their staff are not fully proficient at their jobs.

The report, published on Tuesday, is the culmination of more than two years' work by the task force, which was set up to advise the government on the skills available to the economy.

It suggests that the UK's skills shortage is having a significant impact on its productivity, costing the country billions of pounds.

Short-changed? One in four adults would have difficulty working it out

The task force chairman, Chris Humphries, said: "Skill shortages are impacting on firms' ability to compete, and act as a drain on business productivity."

The report was presented to the Education and Employment Secretary, David Blunkett, on Tuesday, together with recommendations on how to improve the situation.

The task force says more money should be spent on educating young people to a higher level, as well as getting adults back into learning.

It also recommends that employers put more effort into training their staff to help them acquire the skills needed for their jobs.

Problem for all sectors

Mr Blunkett responded by announcing new reforms to tackle skills shortages.

For their study, task force researchers carried out a telephone survey of 23,000 employers, and conducted face-to-face interviews with a further 4,000.

They found that the jobs most affected by skills shortages were those in craft and technical areas.

Their survey also highlighted the low level of achievement by young people in maths and science subjects.

And it showed, unsurprisingly, a growing demand for information technology skills, and forecast that this sector alone would need to recruit more than half a million people over the next 10 years.

However, Mr Humphries said skills shortages were a problem across all sectors, with the manufacturing, business services, wholesale/retail, construction, and health and social care industries being the five hardest hit.

He told BBC News Online: "Because of skills shortages, employers are lowering their expectations when recruiting people and cutting back on capacity and quality levels, which has a knock-on effect.

"Business in the UK is working sub-optimally as a consequence of it.

"Twenty-five per cent of workers can't add up the price of two items coming to �1.35 and work out their change, a basic mathematical calculation.

"If they could, it would increase the UK's gross domestic product by �40bn."

Finding a plumber

The Skills Task Force report follows a number of other publications which have highlighted literacy and numeracy problems in the UK.

A report by the Basic Skills Agency last year calculated that one in three adults could not work out the area of a room, while one in five would be unable to find a plumber in the Yellow Pages telephone directory.

And a report earlier this month by the Organisation for Economic Co-operation and Development (OECD) found a wide variation in literacy levels even among technologically advanced countries, with the UK ranking in the lower half of a 20-nation survey.

Most disturbingly, the report revealed that the UK had the fourth highest level of unemployment amongst people with the lowest levels of basic reading skills.