Nearly two thirds of businesses are concerned about impact of a hung parliament.

The results of the British Chambers of Commerce’s latest Monthly Business Survey add to growing unease about the prospect of a hung parliament and what it might mean for decision-making. The results follow concerns expressed by leading investment funds last week, who believe the lack of a clear mandate to govern could affect decisive action being taken to cut the UK’s huge budget deficit.

Of the 300 companies polled by the BCC, 22% were “not concerned” and 13% thought the failure to secure a working parliamentary majority at the General Election would be “a good thing”.

Also asked which form of taxation was most likely to rise after the election, leaving aside the planned increase in National Insurance in 2011, companies overwhelmingly said VAT would be increased (54% responded VAT, 13% excise duties, and 12% income tax). This suggests that companies are already factoring in a VAT rise in their financial planning.

In the BCC’s February survey, businesses said an increase in National Insurance would be the most damaging tax rise for the Government to impose on them - just 6% felt that a NICs rise would be the least damaging option, compared to 36% for VAT.

Taken collectively, the BCC argues these results provide further evidence that scrapping the planned employer NICs hike – a tax on jobs – and replacing it with a 1% VAT rise would be less damaging to firms, most of which expect VAT to increase after the election anyway.

Commenting, David Frost, Director General of the British Chambers of Commerce (BCC) said: “Businesses are right to be wary about the prospect of a hung parliament. Instinctively, companies prefer a clear mandate to lead and govern. With our economy still fragile and the public finances in a dire state, the overwhelming concern is whether a hung parliament will provide decisive action around the UK’s unsustainable deficit.

“Whatever the outcome of the election, whether we have a coalition government or not, we must see a credible plan to reduce the deficit and restore confidence within ninety-days.”

Talking about National Insurance and VAT, Mr Frost added: “These results provide further evidence that the employer National Insurance rise, planned for 2011, should be abolished in full. Most businesses expect VAT to increase after an election to help plug the hole in our public finances. Considering companies have already said that VAT would be less damaging to their operation than a hike in NICs, it seems obvious that the tax on jobs should be scrapped and replaced by a less harmful tax on consumption.”