PRIVATE sector jobs and start-up businesses in the south are under threat from new competition posed by local authorities, it emerged today.

The Federation of Small Businesses, which represents the interests of the self-employed, has sounded the alarm bells over the Local Government Bill.

It claims the Bill, which gives the right to cash-strapped local authorities to set up their own trading companies in a bid to raise public funds, has serious implications.

They will be able to undercut established services because they don't have the overheads that private businesses struggle with.

Subsidised councils will also be able to charge for services such as planning advice, vehicle maintenance, gardening and security.

Graham Ellis, the Southampton FSB branch chairman, told the Daily Echo: "Local authorities only need to cover their costs and so will undercut businesses which offer similar services but also face the commercial realities of covering their overheads and making a profit.

"These new charges will be devastating for small businesses, threatening jobs and livelihoods and wiping out potential markets for start ups."

So far the legislation has been allowed to pass through Parliament without amendments, warned Mr Ellis.

Now small firms will have to rely on guidance written by civil servants for protection.

But that guidance is currently lacking in genuine safeguards and much of it has still not been published, said Mr Ellis.

He added: "Small businesses have a strong voice in Westminster, with a Minister for Small Firms, a Small business Council, and the largest all-party group in Parliament.

"All three promote the interests of small firms in the corridors of power and now need to make their voices heard on this vital issue."

The FSB is demanding that each council should be required to undertake a full investigation into the impact on firms in its area before it goes into business itself.

Small firms also desperately want the reassurance that local authority charging activity will be monitored and stopped if used inappropriately.