The Federation of Small Businesses (FSB) has claimed that small firms would employ new staff if the government cut National Insurance Contributions (NICs).

Its latest business survey found that small firms continue to be stifled by challenges that affected them during the recession, including late payments from other firms and a lack of finance from the banks, which forced many small firms to close.

Regardless of any recovery, many small firms say these issues continue to prevent them from taking on staff.

FSB members want policies such as cutting NICs to be at the heart of plans for growth.

The FSB’s ‘Voice of Small Business’ survey, with more than 1,700 respondents, showed that insufficient work and uncertainty over contracts (37%), the state of the economy (33%), cash-flow (31%) and access to finance as well as the cost of credit (16%) are preventing them from employing.

With 2.46 million people out of work, the FSB believes that it is crucial that the government provides incentives to help small businesses to take on staff and tackle unemployment.

According to the survey, ensuring invoices are paid within 20 days would encourage 17% of small businesses to take on staff.

31% of respondents said that reducing NICs payments for the first six months of employment would encourage them to take on more staff, and 11% said extending the NICs holiday scheme would be an incentive.

The government introduced a NICs holiday for start-ups that take on up to 10 employees in 2010, but the FSB believes this does not go far enough. The trade body is urging the government to extend the NICs holiday to existing firms with up to four members of staff that take on up to three new employees.

The FSB is also calling on the government to help small businesses employ more apprentices and interns: 29% of respondents said increased support would encourage them to take these on.

John Walker, national chairman of the FSB, said: “We have been saying for some time that small businesses would be encouraged to take on staff if National Insurance Contributions were reduced. Small businesses want to employ but have told us that they need incentives to do so. The Government must extend the National Insurance Contributions holiday to existing businesses if small firms are to take on new staff and so help tackle high unemployment.