The increase in small business costs directly resulting from Government policy decisions has significantly outpaced inflation in recent years.

That's according to the Federation of Small Business's new Impact of Government Policy Index (IGPI).

Produced by leading independent consultancy the Centre for Economics and Business Research, the report finds that a wide range of Government taxes, reliefs and employer obligations have caused outgoings for smaller firms to rise by an average of 12.5 per cent in the five years to 2016.

That compares to a cumulative Consumer Prices Index (CPI) figure of 7.7 per cent over the same period. The UK IGPI, starting from 100 in 2011, increased to 112.5 for 2016.

Mike Cherry, FSB national chairman, said: "Policy should always be evidence-based. This new independent research sets out just how the costs of many historic and individual policy decisions have mounted up, heaping large and sustained pressures on small firms at a rate that's significantly outstripped CPI.

"Given that small firms employ 60 per cent of private sector workers and are the engine room of our economy, all policymakers should take heed of this cumulative burden when it comes to future policy interventions.

"As the Budget approaches, entrepreneurs will be looking to the Chancellor for measures to help bring down the spiralling costs of doing business, as well as making sure that all ministers and departments know the business costs of any proposed new interventions."

Medium-sized businesses report the highest IGPI for 2016 (120.1) followed by micro (118.1) and small (111.4) firms.

The construction sector is hardest-hit by Government interventions, according to the new report, with costs rising 34 per cent as a result of policy decisions.

Being a labour-intensive industry, construction firms have been heavily impacted by the introduction of pension auto-enrolment, increases to minimum wage rates and rising employer National Insurance Contributions.

Mr Cherry added: "Small construction firms are being disproportionately squeezed by Government-imposed costs. If this administration is serious about tackling the housing crisis, that has to change."

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