According to a survey by independent membership body TheCityUK of 500 small and medium sized enterprises (SMEs), 43 per cent of respondents see reduced margins and profitability as an issue, with 17 per cent viewing it as a key risk to their business in the coming year.

Higher VAT concerns 39 per cent of respondents, with 15 per cent seeing it as a key risk. Reduced cash flow is identified as a concern by 36 per cent.

Chris Cummings, CEO of TheCityUK, says: ‘There’s no doubt that 2011 poses significant challenges for small businesses which are the backbone of the national economy and employ over 13 million people.

‘Business has pressing concerns that must be heard if the private sector is to create the jobs and opportunities needed to take up the challenge of generating real growth and make sure the UK remains globally competitive.’