'It's another example of us being clobbered'

For Terry Deakin, the owner-manager of a small electronics manufacturer, the increase in national insurance contributions could simply be the last straw.

"This is just one more thing and it brings forward the day when I say that it's not worth carrying on," he says from the shop floor of his factory in Warrington.

His business, Advance Coils, employs 40 mainly female workers making transformers and turning over about £1.4m a year – a classic small and medium-sized enterprise.

"Eventually I will have to say goodbye to this lot and I would feel that I had let them down," he said. "But it is successive governments burying me in costs."

Mr Deakin, 57, who has run the business for 15 years, said that he would have simply have to absorb the impact of the cost increase on his profit margins. "Year by year my profits are being eroded," he said.

"This NI increase is frankly just another example of us being clobbered yet again."

The only other options were to put the prices up or to cut back on his workforce – neither of which he said he could afford to do.

"If you put prices up to try to recover the increase we risk losing whole chucks of business," he said. "We have the sword of Damocles hanging over our heads and it has the word China written on it."

In other words, Mr Deakin said, any increase in price would be purely another incentive for his customers to look overseas for suppliers, with the Far East the most likely destination.

But he could not cut staff numbers without jeopardising his contracts. "There's nothing left to cut," he said. "We're not cut to the bone, we're cut to the marrow."

From his perspective in the electronics industry, Mr Deakin cannot see any future for the manufacturing sector in the UK.

"The Government obviously does not want manufacturing and sees the UK as totally a services economy," he said. "But if there's no manufacturing left who are all these people going to service?"