As the increase in VAT to 20 per cent came into force last week, fuel duty also rose to a record high, putting further pressure on already hard-hit small companies’ cash flow.

In opposition, the Conservative Party promised to introduce a “fuel duty stabiliser”, a mechanism to reduce volatility in pump prices by lowering duty as petrol becomes more expensive and vice versa. This pledge has not yet been delivered and the government is planning to increase fuel duty by 1 per cent above inflation every year until 2014.

FSB national chairman John Walker says: ‘The country’s small businesses are not just hard-hit by the recent VAT rise, but also by record high fuel prices which has come at the most fragile of times. Small firms, such as the haulier and the taxi driver, will all be severely affected by this rise in fuel duty.

‘Unlike big businesses, they will have to pass the cost onto customers at a time when they already have to deal with the VAT hike.’

Walker also highlights the damaging effect of further rises.

‘It is imperative the government acts now and introduces the stabiliser to avoid a relentless flow of fuel duty increases that simply put small firms on a knife-edge.’