Sussex's economy is being held back by a shortage of skilled workers who cannot afford the house prices.

Ken Stevens, spokesman for the Federation of Small Businesses in Sussex, said urgent action needed to be taken by both local and national government.

He said: "We work closely with councils in putting together a strategic plan for the area in terms of housing, employment, transport and education but the root of the skills shortage seems to be high cost housing.

"We all believe in a free market where demand and availability dictate prices but the cost of housing has gone mad and some sort of intervention is necessary before businesses start relocating because they can't recruit locally."

Mr Stevens wants at least a quarter of all housing developments to be designated as low-cost housing and believes there should be controls on land values.

He said: "In some ways, the problem is a result of the government's success in reducing the number of people out of work.

"There are more jobs to be filled and fewer people available to fill them and people with the right skills are being put off moving into this area by the high property prices which don't match the salaries."

Peter Ranger, who manages an electronics firm in Eastbourne, said recruiting people with the right skills had been difficult for five years.

He said: "A lot of government money has gone into training so the skills should be there. What is proving the stumbling block is house prices.

"We can't get people to relocate here. They can't afford to."

Last year, house prices in Sussex rose by 16 per cent, making the average house worth more than £160,000, according to the Halifax house price index.

This is higher than the £155,000 average for the South-East.

The average wage in the county is below £21,000, the national average. This puts the average property way out of reach of the average earner.

Joe Clease, economic researcher for Sussex Enterprise, said: "A lack of affordable housing in Sussex may lead to skills shortages or increased commuting into and within Sussex.

"People in traditionally low-paid jobs such as hotels and catering will find it difficult to afford houses in Sussex and could be forced to move elsewhere, leading to some businesses having to increase wages to attract staff.

"A large number of well-paid professionals have moved into Brighton and Hove in recent years, making it more difficult for some businesses to find the right staff.

"Sussex Enterprise is working with the Learning and Skills Council to ensure Sussex develops a workforce which meets the needs of the business community."