By Max Clarke

Small businesses will have to lay off staff, freeze wages and reduce investment in new products and services if fuel duty prices continue to rise, a snap poll by the Federation of Small Businesses (FSB) shows.

In a snap poll of more than 400 small firms, nine in 10 (89%) said the hike in fuel duty at the beginning of the year will cost them up to £2,000 over the next six months, on top of regular outgoings.

Unlike big businesses, small firms are unable to absorb the cost and in order to deal with the extra expenses, 62 per cent said they will have to increase prices if fuel prices continue to rise, one in 10 small businesses said they will lay off staff, and a quarter (26%) said they will freeze wages, a huge concern as unemployment has reached 2.5 million.

The Government has said it is putting it's faith in the private sector to put the economy onto a firm footing yet 36 per cent said they will have to reduce investment in new products and services and nearly eight in 10 (78%) said their profitability will be reduced — hardly conducive for growth.

The FSB has been calling for the Government to put in place a fuel duty stabiliser - a mechanism to ensure an automatic freeze on fuel duty increases and a reduction in duty to match any increases in VAT revenues from higher pump prices - which the Conservative Party promised when in opposition.

The FSB is concerned that if the Government does not act soon and introduce the stabiliser, small firms will not be able to grow and take on new staff, and the sector known for its innovation and job potential will be left on a knife-edge and simply surviving.
The FSB is also calling for all future fuel increases to be scrapped until a stabiliser is put in place.

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

"These figures show that the rise in fuel duty is really having a negative effect on small businesses that actually want to grow, innovate and take on new staff. The Government has said it is looking to the private sector to put the economy on a firm footing, but the hike in fuel duty is doing the opposite and hampering small business growth. With future fuel duty rises looking likely, small firms are just going to be left trying to survive.

"The Government promised in opposition that it would put a fuel duty stabiliser in place, and it is clear that without such a measure, the country's five million small businesses will be put on a knife-edge. It is vital the Government goes back to its pledge and puts this stabiliser in place."