Government plans to boost an export-led recovery will falter unless it changes its contradictory position on complex contract law for small firms doing business in Europe, says the lobbying group.

The government is currently encouraging business expansion into the European single market, with figures showing that if all barriers to trade within the EU were withdrawn, UK GDP would increase by more than 7 per cent.

Small businesses will play a key role in this export-led recovery, but the FSB is concerned that this messaging from the government is contradictory when the rhetoric is compared with action.

Businesses that currently trade across the EU and sell online have to be aware of and use 27 different types of contract law in the different countries they trade in.

One third (31 per cent) of businesses trying to trade across the EU still encounter legal or regulatory barriers while half of small firms (51 per cent) have said they would expand their business activities if they could apply a single European contract law for cross-border transactions.

Furthermore, 76 per cent of businesses say they would expect to save costs if they could use a single European contract law across the EU, rather than having to use different laws when trading in different countries .

The FSB supports the government’s development of the Single Market but calls to reduce the burden of having to use different laws across 27 member states and to consider an optional single, more simple contract law for small firms doing business in Europe, in order to facilitate cross-border trade.

FSB national chairman, John Walker says, ‘An optional EU-wide system of contracts is clearly the only way to solve the legal barriers small businesses face when selling within the EU.

‘While the government continues to promote the Single European Market, it must consider an optional contractual instrument that small firms can choose to use in order to make cross-border trade much easier and realise that growth.’