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All start-ups should get NIC holiday as confidence stays fragile

A leading business group has urged the government to extend the promise of a national insurance contribution holiday for new businesses right across the country as a new survey shows business confidence in decline.

The Federation of Small Businesses (FSB) said that its latest business index survey recorded a worsening of confidence in the second quarter of 2010.

In a survey of over 1,200 firms, only 4 per cent of respondents believe that business prospects will improve in the third quarter of the year, down from 16 per cent in March. 

The survey also suggested that almost 67 per cent of small firms are operating below capacity, with those in the manufacturing sector faring much better than service sector firms. 

The findings further highlighted how the UK economy is still some way from a full-speed recovery, the FSB argued, with 64 per cent of firms in the south east of England likely to be working below capacity, more than anywhere else in the country. 

The government announced in the emergency Budget that the South East, London and the East of England would be exempted from a proposed national insurance holiday for new businesses.

But the FSB is concerned that the regions affected could be starved of start-up enterprises.

John Walker, the FSB's national chairman, said: "The consensus view from small firms is that the recovery is far from secure and there are significant risks to business growth in the future. With this is mind, as well as the fact that almost 70 per cent of businesses report working under capacity, we encourage the government to support small businesses to grow and expand. 

"With small firms in the South East most likely to be working below capacity, this shows how wrong the government is to not include this vital region, as well as the East and London, in its proposals for a National Insurance holiday for start-up businesses. While we support the policy we believe that it should be extended to be UK-wide and be available for existing businesses too."