By Peter Wozniak
A report by the Federation of Small Businesses shows pervasive pessimism about the country's economic prospects, claiming many companies are now at the "tipping point".
The survey is a direct rebuttal of a letter co-signed by 35 heads of companies published in the Telegraph yesterday which dismissed the impact of the spending cuts and promised a strong private sector recovery.
The FSB report stated that 38.1% of small companies were suffering from a fall in revenue in the three months leading up to September.
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Meanwhile, 10.4% expected to have to lay off staff in the months to follow the spending review, while the proportion of FSB members expecting economic improvement fell to a paltry 0.5% - down from 16.2% at the beginning of the year.
John Walker, the FSB national chairman said: "Small businesses are now at tipping point and are looking to the government for a growth strategy to go alongside the inevitable pain from the comprehensive spending review, due later this week.
"The FSB has called for a programme for growth to help support the employment potential of existing firms as the axe falls. Coupled with the spending cuts is the impending 2.5 per cent rise in VAT in the New Year, a cost which small firms will not be able to absorb."
This flies in the face of the business chiefs' letter yesterday, which buoyed the chancellor ahead of the big announcement tomorrow.
The letter claimed: "There is no reason to think that the pace of consolidation envisaged in the Budget will undermine the recovery.
"The private sector should be more than capable of generating additional jobs to replace those lost in the public sector, and the redeployment of people to more productive activities will improve economic performance, so generating more employment opportunities."
It appears that smaller businesses, which the government claims are crucial to any economic recovery, are less optimistic about Britain's prospects.
Mr Walker added: "The government is looking to the private sector to create jobs and take on the people that will be made redundant as a result of the cuts.
"Evidence from this report shows that small firms do not have the confidence to do that yet and so we urge the government to ensure that the right measures for firms to grow are laid out."
The spending review is to be fully revealed tomorrow afternoon.