Chancellor Jeremy Hunt is preparing to relax the hardline Brexit position on immigration in order to ease the skills shortage.

He said it was “very important” for Britain to allow hundreds of thousands of foreign workers to enter the UK every year.

The government is now seeking a long-term solution to bring down migration in accordance with the demands of Brexit supporters but “in a way that doesn’t harm the economy”.

Daily Business last week urged the Chancellor to tackle the issue in order to ease the staffing shortages which are hindering growth and forcing up salaries as firms compete for workers.

The number of unfilled posts between August and October was 1,225,000, and while this represents a gradual fall over the year, it remains 429,000 (54%) above the January to March 2020 pre-coronavirus (COVID-19) level.

The Office for Budget Responsibility said that annual net migration would fall from 224,000 next year to 205,000 from 2026 onwards. Previously, the OBR had predicted that net migration would fall to 130,000.

Downing Street is broadly sympathetic with communities, particularly on the Kent coast, affected by the arrival of thousands of asylum seekers and other refugees who are putting pressure on local services. The government is taking steps to ensure they have genuine claims to remain in the UK.

More than 40,000 people have arrived on the Kent coast this year — the most on record.

However, there is support for plans to maintain levels of skilled migration while tackling illegal immigration remains a high priority.

Mr Hunt said: “It’s important that we’re clear with people that there needs to be a long-term plan if we’re going to bring down migration in a way that doesn’t harm the economy.

“So we’re trying to put in place that longer-term solution, but we are recognising that we will need migration in the years ahead. That will be very important for our country.”

He said that Home Secretary Suella Braverman’s priority is to reduce illegal migration and deal with the small boats issue.

“She has the wholehearted total support of myself and the prime minister in tackling that problem,” said Mr Hunt.

Sir Iain Duncan Smith, the former Conservative Party leader, said the Chancellor was risking a “return to the mistakes of the Osborne-era”.

He said: “If they think that migration will boost growth, they have another think coming.

“Tony Blair and George Osborne both believed there was no problem with migration. But there is a problem. It lowers wages for those who are here and does nothing to improve productivity. We ended up with massive levels of cheap labour which actually lowered the incomes for UK citizens.”

Mr Hunt also admitted that the Brexit deal had undermined growth but he rejected the idea of rejoining the single market because it would mean agreeing to the free movement of people around Europe.”

He promised to remove trade barriers with the European Union as part of the government’s growth plans.

“I have great confidence that over the years ahead we will find outside the single market we are able to remove the vast majority of the trade barriers that exist between us and the EU. It will take time,” he said.

Asked whether that could mean rejoining the single market, he said: “I don’t think it’s the right way to boost growth because it would be against what people were voting for when they supported Brexit, which was to have control of our borders and membership of the single market requires free movement of people.”