HAMPSHIRE firms broadly welcomed the deep cuts, but urged the Government to extend National Insurance tax breaks to local firms.

Although the axe is likely to be felt on the balance sheets of companies across the region, most said they understood the need to tackle the ballooning budget deficit.

The baton now falls to the private sector to create an avalanche of new jobs to soften the impact of the near half a million forecast government jobs expected to be axed in the coming months.

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Business leaders are now warily eyeing the impact of the cuts on consumer spending in the run-up to the all-important Christmas sales period and ahead of a VAT rise to 20 per cent in the new year.

They also want the National Insurance (NI) contribution holiday for new companies extended to Hampshire start-ups that are currently excluded.

New businesses set up outside London, the South East and East of England are now eligible for an NI holiday worth up £50,000 as a reward for taking on staff in their first year of trading.

Severe impact Jimmy Chestnutt, chief executive of Hampshire Chamber, said: “The cuts will have a severe impact on businesses whose order books rely solely or mainly on work from the public sector. The private sector may not yet be in a position to employ those who lose their jobs in the public sector until the economy gets moving again.

“It is therefore disappointing that Hampshire employers will be missing out on the NI holiday that other regions will enjoy.”

Ken Moon, chairman of the Federation of Small Businesses, Wessex Region, said: “We all know we are living in an age of austerity and that these cuts will affect us all. But our members understand that to reduce the public sector deficit, these cuts had to be made.

“Small firms are at tipping point and lack the confidence to take on the 500,000 people that will be made redundant as a result of these cuts. So it is up to the Government to incentivise |the small business community – through extending the NI Contribution holiday and cutting VAT to five per cent in the construction sector – to promote growth and help small firms take on new staff.“