My 3 year old doesnt talk at nursery

My son turned 3 in sep and has now been at nursery for 4 months. He does not speak to anyone (teachers or kids) at nursery. He enjoys going to nursery and talks about it at home. He goes 5 mornings a week. His teachers have spoke to me on several occasions about him not speaking and they try to encourage him. He used to atleast say his name at welcome time but his teacher said he doesn't speak at all now and seems more withdrawn. She said when she tries to get him to talk he can become quite flustered. He will nod and shake his head. He talks away to me in the cloakroom and the second we go in he just walks off with his head down and doesn't even say bye. He talks when back in cloakroom again.

He is naturally shy by nature and quite stubborn nature. He does occasionally choose not to speak to family etc. For example if his nana gets in car and talks to him he doesn't always talk back unless he wants to. Other times he doesn't stop for breath. Sometimes he's very shy in public other times he talks to people. Today we went to the dentist and he spoke away to the receptionist at his own will and showed her his picture.

I read about selective mutism but his teacher said it's not that as he nods and shakes his head and sometimes talks a few words to himself when playing.

On one occasion at nursery a boy was pulling his shoes and he got quite upset and was crying without making a noise.

He tells me he likes his teachers. I asked again today why he doesn't speak and he said I don't want to speak at nursery I'm just a little bit shy. He's obviously picking up on people saying he's just a little bit shy.

Has anyone ever experienced this with your child? What did you do? I don't know if to ignore it or try to encourage him.