Government plans to cut new businesses in the south east out of a National Insurance “holiday” have been criticised by a Croydon business leader.

Jeremy Frost, chairman of the borough’s Federation of Small Businesses, said the helping hand provided by such a scheme was essential to helping small start-ups grow.

Research from the FSB shows two thirds of firms in the south east are operating below full staff capacity, with the service sector suffering especially heavily compared to manufacturing.

Only four per cent of the 1,200 FSB respondents believed business prospects will improve in the third quarter of the year, down from 16 per cent in March.

Mr Frost said: “The consensus view from small firms is that the recovery is far from secure and there are significant risks to business growth in the future.

“With this is mind, as well as the fact that almost 70 per cent of businesses report working under capacity, we encourage the Government to support small businesses to grow and expand.

“With small firms in the south east most likely to be working below capacity, this shows how wrong the Government is to not include this vital region, as well as the east and London, in its proposals for a National Insurance holiday for start-up businesses.

“While we support the policy we believe that it should be extended to be UK-wide and be available for existing businesses too.

“With 600,000 public sector jobs expected to be lost, stimulating private sector job creation, especially in small firms, will be vital to rebalancing the economy.”