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Students taking science and engineering degrees should be given a £1,000 government bursary to encourage take-up of the subjects at university level in order to combat a current skills shortage, a leading business group has said.

The "golden carrot" bursary is necessary as part of "urgent action" needed to reverse decades of decline in the study of such subjects, the Confederation of British Industry (CBI) has warned.

Providing the financial incentive would cost an estimated £200 million a year and "reflect the importance" of science skills to the UK economy, the business organisation says.

The proposal is part of a five-point plan proposed by the CBI to combat the shortage of students graduating with degrees in science, technology, engineering and maths ('Stem') subjects.

According to the CBI, the proportion of graduates leaving university with a degree in either physics or chemistry dropped by 25 per cent between 1994 and 2006, while the number of students studying the subjects at A-level has also slumped.

Science and engineering companies are struggling to fill posts as a result, claims the CBI, which reports that 80 per cent of engineering and industrial companies expect to be faced with a shortfall in graduate recruits this year.

The employers' organisation has therefore proposed a series of measures which it says are necessary to help deliver the 2.4 million newly-qualified staff with Stem skills it claims will be needed by British business by 2014.

In addition to calling for the introduction of £1,000 bursaries to help Stem students with university tuition fees, the CBI also wants ministers to make £120 million of new funding available to pay for one-to-one careers advice for students aged 14,16 and 18 in order to "challenge misperceptions" about science and engineering degrees.

Other proposals to boost the take-up of science degrees include a recommendation to automatically opt the brightest 40 per cent of 14-year-olds into separate physics, chemistry and biology courses at GCSE level and calls for school science labs to be better equipped and for more specialist science teachers to be recruited.

Commenting on the need to boost the number of university students studying science CBI director general Richard Lambert said: "Some employers are already finding it difficult to get the right talent, and the problem is set to get worse.

"Bursaries towards the cost of degrees which are most useful to the economy could kick-start thousands of young people into reconsidering a future in science," he added.

The government claims that it is already spending £5 billion a year promoting Stem skills.