More than two thirds of companies expect to suffer from today’s VAT rise from 17.5 to 20 per cent.

According to a survey of 1,600 business owners by the Federation of Small Businesses (FSB), 71 per cent think the rise will be detrimental to their company.

More than half (52 per cent) expect to increase prices, 45 per cent forecast a fall in turnover, and 36 per cent expect a loss of customers as a result.

The FSB has been calling for the government to help alleviate the stress on small firms’ cash flow by increasing the threshold at which they begin to pay VAT, from the current level of £70,000 to £90,000.

John Walker, national chairman of the organisation, says, ‘If the government truly believes that the private sector is going to strengthen the recovery we need to see action.

‘Increasing the threshold at which companies have to register for VAT will put almost £900 million back in the pockets of small businesses. Without this small firms will struggle to bounce back as the spending cuts start to bite.’

Plumbing entrepreneur Charlie Mullins believes the VAT rise should be deferred by a month to counteract the disruption to the economy caused by the extreme winter weather.

Mullins says, “I’ve been in favour of the VAT rise to help pay back the massive mortgage Gordon Brown took out on our country, but with the weather misery on top of the economic strife I seriously think we should give people a break. I’m sure the country’s coffers would prefer 17.5 percent of a purchase than get nothing at all.”