Research carried out among 1,000 business owners by Bibby Financial Services reveals that 40 per cent believe that reducing the rate back to 17.5 per cent would provide much-needed support to small and medium-sized businesses.

When new rate was introduced, the government said it was necessary to help bring down the UK’s high budget deficit and Chancellor George Osborne confirmed the move was more ‘progressive’ than a hike in income tax or National Insurance.

Edward Rimmer, UK chief executive of Bibby Financial Services, says that the rise has been detrimental to businesses because of the negative impact on spending by companies, which may have been deterred by the extra cost of resources to run their firms.

Rimmer adds that it also impacts businesses whose customers may be put off by the higher cost of goods, as the latest Christmas high street spending figures have suggested.

He continues, ‘The rise in VAT has been a punitive measure for small to medium-sized businesses and among the 4,000 clients we work with and provide funding for in the UK, we are consistently being told that reducing the rate back to 17.5 per cent would be a welcome move.

‘Moving forward in 2012, businesses need all the support they can get if the economy is to avoid slipping into another recession.’

As well as the 40 per cent who want to see the VAT rate reduced, 34 per cent believe there should be more financial incentives for taking on additional staff and 29 per cent want to see the 50p higher rate of tax scrapped.

‘Without effective practical support and accessible funding solutions for small and medium-sized businesses in the UK, 2012 could be another difficult year ahead,’ adds Rimmer.

See also: Managing VAT: A small business guide