The Chancellor needs to produce a “confidence-building” budget, aimed at supporting employers.

That is according to the Confederation of British Industry (CBI), which has called on the government to reverse decisions which it said would only add to business costs.

Commenting on the issues facing firms, John Cridland, CBI deputy-director general, said: “We need to see measures to instil confidence by supporting as many businesses through the recession and safeguarding as many jobs as possible.

“That means not adding to the cost of employing people with business tax rises at a time when companies are fighting for survival.”

Mr Cridland also said that it was important to invest in skills and training to “help business remain competitive” and to ensure they could bounce back when economic conditions improve.

He said that it was therefore important to provide companies with help to “retain and re-train staff”.

The CBI’s director of HR policy, katja Hall, recently condemned the government’s decision to remove VAT concessions on wages for temporary staff as a “very disappointing, retrograde step”.