According to IT company Humyo.com, 65 per cent of SMEs did not know that statutory minimum holiday allowance is increasing from 16 to 20 days (not including bank holidays) for all full-time employees from 1 April.

James Irwin, founder of handyman business The Handy Squad, says: ‘The government definitely could have done more to advertise it. This will be an additional cost for a lot of small businesses and might be the final straw for them in this climate.

‘I do understand it from the perspective of employees – they should be getting a minimum of 20 days – but the government could offset the cost somehow.

Neil Warwick, partner at Dickinson Dees LLP, says the proposal to increase statutory holiday entitlement was taken in a more benign economic climate.

He says: ‘Clearly if small businesses are to be adversely affected, this does not make good sense at a time when we desperately need this sector to be the lifeblood of the economy.

‘However, it is important that people have a good work-life balance. An alternative might be to allow businesses the flexibility of increasing holiday entitlement when circumstances improve.

A spokesperson from the Department for Business, Enterprise and Regulatory Reform said that businesses have been preparing for the change since July 2007.

‘Extra holidays will improve the lives of millions of hard-working British employees. Businesses will benefit from a more motivated and productive workforce, as well as reduced levels of sick leave,’ he added.

Of the 100 small businesses surveyed by Humyo.com, two-thirds (63 per cent) felt the increase should be scrapped.