Small firms are bearing the brunt of the credit crunch and are suffering from “the burden of tax, red tape and late payments”, according to a report from the Small Business Research Trust (SBRT).

Small business owners were questioned in the survey, compiled in conjunction with the Forum of Private Business (FPB), whose chief executive, Phil Orford (pictured), said of the findings: “Trading conditions have declined significantly this quarter in all areas – sales, employment and investment, with only medium-sized businesses suggesting any growth in levels of employment.

“This contrasts with the optimism expressed at the end of 2007, where confidence in the future level of economic growth still showed signs of remaining stable.”

Of the small firms surveyed as part of the SBRT’s report for the first quarter of 2008, 74 per cent with both overdrafts and loans reported an increase in lending rates over the last six months. Rising interest rates are another concern, with 59 per cent of respondents indicating that they had had a ‘negative’ or ‘very negative’ impact on investment. Purchasing, employment and sales have also been hit.

Credit restrictions hit sales in the business services sector, including finance and real estate, more than in any other, with 36 per cent of respondents indicating that they had had a negative impact. This was followed by mining, energy and water (33 per cent), agriculture and fishing (32 per cent), manufacturing and construction (both 29 per cent), wholesale and retail (28 per cent), hotels and restaurants (28 per cent), transport and communications (25 per cent), and education and health (17 per cent).