Small business insurance policyholders may be set to struggle as the government prepares to increase VAT from the start of 2011, if the claims of one expert are anything to go by.
Commenting in the wake of the emergency Budget, Edward Rimmer, UK chief executive of Bibby Financial Services, states that the rise to 20 per cent "could have serious repercussions for some firms".
While the move is aimed at helping to reduce the country's public spending deficit, Mr Rimmer claims that while larger businesses will be able to absorb such an increase in costs, small organisations "particularly in those industries which adhere to tight profit margins" cannot afford this.
Small business insurance customers may also want to note his points that the VAT rise will "do nothing to stimulate spending in the economy".
However, he claims there were a number of positives for small and medium-sized firms in the emergency Budget, praising the extension of small business rate relief from October.
Mr Rimmer adds that expanding the Enterprise Finance Guarantee will mean businesses will continue to receive support when seeking credit, something that could prove of value to small business insurance policyholders.
Richard Lambert, director general of the Confederation of British Industry, recently stated that moves to increase VAT will be "the least damaging" to Britain's prospects for future economic growth.
