The region's skills crisis has reached a 21-year high with almost nine in ten manufacturers finding themselves unable to bring in skilled staff.
Recruitment concerns among the region's crucial supply chain firms are the highest ever recorded by the Greater Birmingham Chambers of Commerce's (GBCC) economic survey since it began in 1997.
A shortfall in young engineers and technicians is a major concern for the region with rising demand on the back of Jaguar Land Rover's growth but too few young people being trained.
Paul Faulkner, chief executive of the chamber, said it was holding the region back and called for the Government to act.
He said: "It is an exceptionally worrying trend that nearly nine in ten manufacturers in the West Midlands are facing major problems with recruitment.
"The West Midlands is traditionally a very resilient region but, if firms cannot attract the right calibre of candidates to help grow their businesses, then it makes it far more difficult for companies to plan ahead with a reasonable degree of certainty.
"The Government should be aware that continuing skill shortages can only increase the headaches for manufacturers, many of whom may well be still recovering from the impact of the recession."
The Royal Academy of Engineering claims the UK needs more than one million new engineers and technicians to solve the skills gap.
However, recruitment difficulties for greater Birmingham manufacturers are at a record high with an overwhelming 89 per cent of firms facing hiring problems, especially for skilled workers.
The research, supported by recruitment agency Katie Bard, also found worries over business rates while competition has added to the squeeze on firms amid evidence that completed sales and future orders have declined over the last three months.
But the service sector paints a more bullish picture, with almost 59 per cent of firms confident that profits will improve over the next 12 months and 71 per cent anticipating a sales surge.
However, there has been a major fall in manufacturers confident of rising profits - down to 37 per cent down from 71 per cent just three months ago - with several issues conspiring against the sector.
GBCC policy adviser Stephanie Wall said: "Concerns among manufacturers included low oil prices and the exchange rate.
"Another concern was the uncertainty around the interest rate. After a constant interest rate for almost seven years, there is wariness from businesses over the market reaction when the rate does finally rise.
"With the Fed having now raised the US interest rate, the Bank of England may now increase the UK rate in the new year.
"We, however, urge the Bank of England to give plenty of forewarning to the business community if a rate increase is planned."
The chamber research showed less than a third of manufacturers said UK sales had increased in the last three months, compared with 50 per cent in September.
The figures are roughly the same for advance orders, 31 per cent for December compared with 52 per cent in September.
The trend is replicated in manufacturing export markets, with 30 per cent of firms saying exports had increased over the last three months compared with 50 per cent in September.
John Mortimer, co-founder and chief executive of the Angela Mortimer group, of which Katie Bard is a member firm, said: "The main issues around skills are lack of intelligent labour market strategies, lack of investment, lack of empowerment, and lack of creativity.
"But all this is against a background that Birmingham still has a lot to play for and is still generally positive.
"To be reporting concerns about recruitment shortages and market weakness at the same time is counter-intuitive but it does illustrate a distinct sense of bumpiness in this moment of the recovery."