The government has been urged to cut VAT and introduce a National Insurance Contributions (NICs) holiday to counteract falling business confidence.

According to the Federation of Small Businesses (FSB) ‘Voice of Small Business’ Index, confidence in the economy fell by 9.6 points from 0.3 to -9.3. 

The FSB research also revealed that one in 10 businesses said extending the NICs holiday would encourage them to take on more staff. Currently the NICs holiday is only open to new start-ups.

It also called for a targeted and time-specific VAT cut to encourage people to spend more.

FSB national chairman John Walker said something urgently needed to be done by government to boost confidence. 

“As businesses come to terms with the double whammy of falling revenues and rising costs, it is no wonder that they’re losing confidence, and unfortunately, as their overheads increase one way to control it is to lay off staff,” he said. “It is the first time since we started the Index that we have seen more people believe that they’re going to lay off staff than take them on."

“We urge the Chancellor to look closely at our NICs holiday proposals and bring this forward in his autumn statement. We fear that without it, the recovery will falter once more.”

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