Research from the RSA Group – formerly Royal & Sun Alliance - reveals that small and medium sized businesses (SMEs) are struggling to cope with the current economic pressures.
RSA, who are experts in small business insurance, says that approximately one in ten (470,000) can no longer afford their running costs.
While the national average of SMEs struggling was 11 per cent, the problem was at its worst in the North (16 per cent) and least prevalent in the South West (one per cent).
RSA's research also found that 81 per cent of SMEs had experienced increased costs from their suppliers, with 56 per cent being forced to pass on the costs to their own customers.
Increased rents were also impacting on small businesses, says RSA, with 11 per cent of respondents claiming that this had had a big effect on their business, while almost a third (30 per cent) cited rising fuel bills as a major factor.
This varied by region, however, with only 47 per cent of small business owners in Greater London affected by fuel costs, compared to 95 per cent in the West Midlands.
Shockingly, seven per cent of SME employers admitted to being so stretched financially that they would risk reducing their insurance cover to cut down on costs.
"Backbone of the Economy"
Mike Skinner, Small Business Director at RSA, said: "SMEs are the backbone of the UK economy and are facing tremendous pressures in these uncertain economic times.
"Increasing costs, a decline in consumer confidence and a lack of credit all add to the difficulties SMEs are facing. It is only natural they should look to reduce costs where possible. But they should not cut corners by doing without insurance.
"It is at times like these that businesses are most at risk though, with increased instances of recessionary related events such as theft and criminal damage."
Help may soon be at hand, however, as the Government is due to announce measures to assists SMEs through the economic slowdown.
The Federation of Small Businesses is also calling for the creation of a £1 billion 'survival fund' to save threatened jobs, with the money being provided by the Treasury and the European Investment Bank.
