According to the Cardiff chamber, 60% of firms recruited in the last quarter but more than two thirds had difficulty filling vacancies.

Despite this, the new report found that business confidence was high in Wales.

In 2004, it said export sales have also risen in both the service sector and manufacturing.

But Helen Conway, chief executive of the Cardiff Chamber of Commerce, said employers were "having difficulty" filling vacancies.

"The shortage is across the board," she said.

"Retail, tourism and construction have had difficulties for some considerable time.

"We are very close to full employment in south Wales and we don't have the numbers coming through.

"This points to a simple choice for the assembly government when it reviews its priorities," she added.

"Inactivity levels are also high, so there is a real need for the assembly government to bring forward a strategy to bring people back to work.

"The opportunities exist. We just need the right encouragement for people to take up the vacancies."

But despite the labour shortage, the chambers claim that businesses in Wales remain confident that they will improve turnover, particularly in the service sector.