AN insolvency expert believes the increase in employer National Insurance contributions, announ-ced in May's budget, will cripple some businesses.

Alan Haden, of Haden Insolvency, in Bromsrove, believes the cautious optimism felt by small and medium-sized companies could evaporate when the new National Insurance rates take effect in April 2003.

"If the "business-friendly" Government was aiming to reward entrepreneurship and innovation, then put simply, it has failed abysmally," said Mr Haden.

"In truth, most small businesses are likely to view the proposed simplification of the VAT regime and the cut in corporation tax as of marginal benefit but absolutely nothing will compensate for the higher National Insurance contributions businesses will be forced to make in less than 12 months time."

He said cost-cutting exercises had already begun "in earnest" in board rooms up and down the county and job cuts were "back in vogue".

"We are currently witnessing an impressive roll call of substantial redundancies from some of the biggest names in business.

Job losses

"The Confederation of British Industry is warning of some 50,000 job losses in UK manufacturing alone and the International Labour Organisation is predicting 24 million jobs will be lost globally during this year.

"A pretty sobering picture is beginning to emerge."

He said downsizing was set to continue, despite predictions the economy would grow by up to two per cent during the next 12 months, protected by low interest rates and increased Government spending.