Small and medium sized enterprises will look to hire contractors in the New Year due to the hassle of hiring permanent staff, experts have forecasted.

Rebecca Burn-Callander, deputy editor of SME advice website Smarta.com has said that the extensive red tape surrounding the hiring of a permanent staff member can prove a "huge headache" for business owners, leading them to seek manpower elsewhere.

"There will also be a lot of collaboration - SMEs exchanging services with other companies, rather than paying an employee to undertake the function," she continued.

This comes as John Walker, the Federation of Small Businesses' (FSB) national chairman, said that unless the government intervenes, small businesses will decrease their workforce this year, despite making up 8- per cent of new jobs in the private sector over the past decade.

In addition, the FSB estimate that for every three jobs created, £10,000 would be generated for the treasury.