The majority of businesses in both manufacturing and services are reporting difficulties in recruiting staff, according to new data.
The latest quarterly economic survey from the British Chambers of Commerce (BCC) has found that the UK economy ended 2018 "stuck in a weak holding pattern", with stagnating levels of growth, labour shortages and falling business confidence.
The survey of 6,000 firms - employing over one million people across the UK - has underlined the impact of current levels of uncertainty as growth in domestic sales and orders reduced.
The findings have also highlighted the extent to which labour shortages have risen in the UK as four-fifths (81%) of manufacturers that tried to recruit reported difficulties in finding the right staff - the joint highest level since the survey began in 1989. In the services sector, the level (70%) hovers close to the record high recorded in the previous quarter (72%).
In manufacturing, the balance of firms reporting increased domestic sales fell three points to +21, while those reporting improved domestic orders fell from +20 to +16. The balance of firms confident that turnover and profitability would increase in the next 12 months also fell.
In services, the balance of firms reporting increased domestic sales fell from +22 to +18, the lowest since Q4 2016. Those reporting improved domestic orders fell from +17 to +14, the joint lowest in two years.
"The UK economy is in stasis," said Dr Adam Marshall, BCC director general. "While it's not contracting, it's not growing robustly either. Throughout much of 2018, UK businesses were subjected to a barrage of political noise and drama, so it's no surprise to see firms report muted domestic demand and investment.
"With little clarity on the trading conditions they'll face in just two months' time, companies are understandably holding back on spending and making big decisions about their futures. The government's absolute priority now must be to provide clarity on conditions in the near term and avoid a messy and disorderly Brexit. Business communities won't forgive politicians who allow this to happen, by default or otherwise."
He added: "Brexit is hoovering up all of government's attention and resources, but it's far from the only cause of uncertainty. Given the magnitude of the recruitment difficulties faced by firms clear across the UK, business concerns about the government's recent blueprint for future immigration rules must be taken seriously - and companies must be able to access skills at all levels without heavy costs or bureaucracy."