By Claire West

According to a new report from the Federation of Small Businesses (FSB) small firms are vital for the UK's jobs market.

Launched at the Liberal Democrat conference, the report: Back to work: the role of small businesses in employment and enterprise, shows that each year small and medium sized businesses take on around 1.3 million unemployed and disadvantaged people. In contrast, large firms with more than 250 employees hire less than 130,000 on average.

John Walker, National Chairman, Federation of Small Businesses, said:

"Small firms play a unique role in providing the way to employment, especially for disadvantaged groups. They have a greater tendency to take on those that would struggle to find a job — those who have not worked for a long time, have little experience or have been sick.

"They have also shown resilience in the face of recession — still taking on some 1.3 million unemployed people per year. While not all of these will be new jobs, this is nevertheless evidence of the crucial role small firms are playing in our economic recovery.

"We know from our survey work that small firms want to do more to support jobs, but their employment intentions are currently on hold. Many businesses don't have the confidence to create new jobs at the moment because cash-flow is tight and they need a helping hand.

"This is why we're calling for the National Insurance Contributions holiday to be extended. There are also a lot of new regulatory changes in the pipeline. Our concern is that these changes will add to the already heavy administration burden for small firms meaning they choose not to grow or take on staff."