Corin Crane, chief executive of the Coventry and Warwickshire Chamber of Commerce, said it was further evidence that firms won’t be able to absorb any more cost pressures.

He said: “We speak to businesses of all sizes and across all sectors and the message is loud and clear – the Budget cannot be used to put even greater tax burdens and cost pressures on them.

“The rise in NI at last year’s Budget is still having an impact and there are further costs coming down the track with the Employment Rights Bill.

“Businesses need to be given the breathing room to be able to grow and the confidence that they can start to plan for the future.”

Jane Gratton, Deputy Director of Public Policy at the British Chambers of Commerce said: “Unemployment continues to edge up while job vacancies continue to fall. These are clear signs that employers are holding back on recruitment under the burden of soaring employment costs. 

“We would normally expect a loosening of the labour market to lead to an easing in average earnings. But, while the rate of growth has slowed, they remain above inflation, adding to pressure on businesses’ balance sheets. 

“Our latest survey shows that labour costs remain the biggest cost pressure for SMEs, cited by 72 per cent of firms. Firms tell us the increase in employer NICs is the biggest driver of this. As a result, we are unlikely to see any further cuts in Bank of England interest rate this year.

“Firms are increasingly fearful of any further increase in costs in the Budget, which they simply won’t be able to absorb. Already, firms are bracing themselves for an additional £5bn cost associated with the Employment Rights Bill, which will threaten investment plans, increase risk and impact on opportunities for people in the labour market.

“That’s why we are clear, there must be no more taxes on business in November’s Budget. The Chancellor must also use her statement to invest in workforce health and skills to help more people thrive in work.”