A shortage of staff and problems in supply chains have hampered UK businesses so far this month as growth slowed to the lowest point in half a year.
A closely-followed survey, which has been running since 1998, said that employment numbers have risen at their fastest rate in its history.
But the lack of workers to fill roles put pressure on companies.
The IHS Markit/CIPS Flash UK Composite PMI gave a reading of 55.3 for August, down several points from last month’s 59.2.
Scores above 50 on the index represent growth, while anything below that is a contraction.
The flash figures are preliminary and based on responses from most of the survey participants.
“An abnormally large slowdown in overall activity in August offers a stark warning to the UK economy that the accelerated levels of growth we’ve seen earlier this summer are not sustainable,” said Duncan Brock, group director at CIPS, which helps compile the survey.
“It was the slowest output expansion for six months, and the worst shortages of staff and materials on record are mostly to blame.”
The manufacturing and service sectors saw the biggest loss of momentum during August, the researchers said.
The survey showed that output was 14 times more likely than normal to be reduced due to staff shortages.
Mr Brock said: “Finding the right skills was difficult for businesses, meaning that job seekers had the pick of the bunch in terms of opportunities.
“The service sector was hiring at a brisker pace than any time in the past 25 years and stronger wage demands followed suit, which resulted in business costs climbing again.
“Manufacturers paid more for shipping their goods, and supplier delivery times were rivalling the height of the disruption last year.”
IHS Markit chief business economist Chris Williamson said: “Prices have risen sharply again, albeit with the rate of inflation moving below July’s record high, as shortages once again fuelled a sellers’ market for many goods and services and wages rose further.”
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