The shortage of affordable homes, both to buy and to rent, in London is crippling firms’ ability to recruit and hang on to staff.

Two thirds (66%) of respondents to a business survey said that housing costs and availability are having a negative impact on the recruitment of entry-level staff.

Compared with 57% when this question was last asked in September 2015, this latest figure is a survey record high.

The housing shortage is also an issue for more senior employees, with three fifths (59%) of the capital’s firms citing it as an issue for recruiting mid-level managerial staff (compared with 45% in 2015), and almost a quarter (22%) saying the same for senior level staff.

Indeed, the gravity of the situation means that nearly half of firms (44%) are offering premium salaries to recruit, and hang on to, staff.

It is also having a knock-on effect on businesses’ ability to offer flexible working, with over a third (36%) finding it hard to do so.

Over a quarter (28%) of respondents said employees are actually leaving their jobs because they cannot afford to live in the local area, whilst nearly two thirds (62%) don’t believe the housing market will become more affordable in the next three years.

There were 176 responses to the joint CBI/CBRE survey, mainly from CEOs of leading companies.

Eddie Curzon, CBI London director, said: “This survey speaks loud and clear – London’s housing shortage is a ticking time bomb.

“The potent combination of lack of supply and high prices means businesses themselves are being priced out of the market, as they can’t afford to recruit and retain their workers, from entry-level to senior staff.

“And with two thirds of firms not optimistic the housing market will become more affordable in the next three years, we have a stark challenge on our hands. “