It is not only credit crunch and economic gloom which is hitting business hard, but also the acute shortage of labour which is making small UK businesses crumble.

The worsening economic condition in the UK and fear of loss of job is compelling migrant workers return home, a new research has revealed.

Small and medium enterprises (SME) in Britain which make annual turnover of £1,440bn and provide jobs to 13.5m people, are in precarious situation with around 40 businesses closing everyday. Shortage of migrant workers would be a big blow to the ailing sector.

The Federation of Small Businesses (FBS) described this as very difficult times and was going to demand Monetary Policy Committee and the Bank of England to lower business rates by 1pc, when they meet this week to discuss ways and means to combat severe recession.

The research was carried by Tenon, the accounting and business advice service. It pointed out that number of businesses employing foreign workers had doubled in the past 2 years. In 2006, only 20% of SMEs were recruiting migrant workers from abroad, the figure has risen to whopping 48%, implying that return of migrant workers to their homes could result into severe jolt to the SMEs and the UK’s economy.

According to FSB chairman, John Wright, businesses’ savings from good days were running out fast. They were cutting costs in energy, marketing, advertising and 40% were worried that they might have to layoff labour next year.