Thousands of small businesses face bankruptcy

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The Federation of Small Businesses predicted a bleak 2009 for many of the capital's small firms and has warned that more than 22,000 jobs will be lost.

Experts warned that urgent action is needed to limit job cuts.

Stephen Alambritis, spokesman for the FSB, said: "Many of these small businesses are in dire straits. The sector is hugely vulnerable and it is a fertile ground for closures. Margins are so tight for these businesses and constant cash flow is vital, so any reduced turnover over the Christmas period is enough to make these shops go under."

He also warned that areas of London will be damaged as stores close.

"Parts of the capital are set to really lose out because of these closures. We may even lose whole high streets that are dotted with these independent shops. Places like Portobello Road, Balham High Street and Clapham High Street rely heavily on small businesses and are going to suffer," he said.

The FSB is now demanding a cap on credit card charges to reduce businesses' costs and help consumers. Mr Alambritis said: "One quarter of London's small businesses are financed on the credit card. With interest rates at two per cent we urge the Government to cap rates, thus releasing more money into London's economy." Matthew Sinclair, research director of the Tax Payers' Alliance, said: "London's economy is built on small businesses that are always under threat from large chains and increasing tax bureaucracy. It desperately needs the Government to impose less burdens on these vital firms."

John Dean, chief executive of the British Shops and Stores Association, said newer businesses are going to be in danger as bankruptcies start to hit.

He said: "It is inevitable there will huge casualties. The worst affected will be the immature firms that are about two or three years old and simply have not had enough time to stabilise."

Mr Dean added: "Once these independent businesses are gone, they are gone for good and it is a tragedy."