By Max Clarke

The Government must extend the National Insurance Contributions (NICs) holiday to existing firms to create an environment for job creation and to help stem high unemployment, the Federation of Small Businesses (FSB) has said.

The FSB has welcomed the Government’s commitment for a National Insurance Holiday for start-up businesses that take on up to five members of staff. But ahead of employment statistics due tomorrow that are likely to show unemployment remaining high, the FSB believes this does not go far enough and must be extended to include existing businesses.

Research in the FSB’s ‘Voice of Small Business’ Index shows that businesses looking to take on new staff fell from 12.2 per cent in quarter three to 8.7 per cent in quarter four. More worryingly, 12.4 per cent expect to decrease the number of staff they have in quarter one 2011 — up from 10.4 per cent in quarter four in 2010.

With unemployment currently at 2.5 million, a report, ‘National Insurance holiday for new jobs in small businesses’, shows that the Government must extend the NICs holiday to existing businesses with up to four members of staff that take on up to three to help stem the trend of rising unemployment.

FSB research shows that 44 per cent of small firms would take on more staff if the Government cut National Insurance, so such a measure would produce an environment for growth and help create much needed jobs.

Small businesses are more likely than big firms to take on people that have been unemployed in the past 12 months, which could prove vital as the public sector cuts really start to bite.

As well as helping small firms with much needed cash-flow, the Treasury would also benefit from the creation of new jobs through income tax and employees NICs.

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

“Unemployment is worryingly high and with inflation above target, small firms cannot rely solely on the consumer for growth. Government must give a helping hand to small firms and create an environment that helps small businesses grow and develop. While they have gone some way in helping new businesses take on new staff, it needs to go further.

“We know that small firms would take on more staff if National Insurance was cut, so to really help boost employment in small businesses, the Government must extend the National Insurance Contributions holiday to existing small firms. As we have heard time and again, the Government is looking to the private sector to lead the recovery, but without the right measures in place, small firms are left without the tools they need for the job at hand.”