"The reduction in VAT to 15% seems pointless, when, for example, a product that sells for £4.99 this week will retail for £4.89 next week after the VAT rate has been reduced," said Nick Palin, the FPB's Director of Finance. "This shows how ill thought-out this reduction has been. All it does is increase the amount of time smaller retailers have to spend wading through bureaucracy."

He added: "At this crucial time of the year, small firms should not be forced to occupy themselves with the level of administration that this change will entail, but [should be concentrating on] running their business and trying to set themselves up for what could be a very difficult year ahead."

FPB member Christopher Tuffley owns The Silver Pear, a retailer of homewares and gifts in Shropshire. He believes the Government's decision to reduce VAT was taken at the last minute, and that it should have reduced income tax instead.

"I sell 20,000 products and employ fewer than ten people, so the workload associated with this cut will be enormous and this Government does not appear to understand the pressure it will place on small firms like mine," said Mr Tuffley. "What makes this VAT cut worse is that it comes at the most crucial time of the year. I do 35% of my trade in November and December and so the introduction of what I consider to be a pitiful 2.5% cut is just creating more work when I simply do not need it."

Another member of the FPB, Lindsey Adam, of Bonkers in Fife, which sells toys and gifts, sees little point in the VAT reduction. She said that she would be unlikely to alter prices on all her products. "The cut does not go far enough, if the Chancellor had reduced the VAT rate to 10% then it might have encouraged consumers to go out and spend, but 2.5% does little, in my opinion," she said. "I will be passing the rate cut onto customers for some products, but not all."

Miss Adam added: "The administrative burden attached is massive. It is further increased because we sell approximately 300 product lines online, and so cannot change these prices until Sunday. To make matters worse, its not just one click and everything changes, we will have to alter each price individually."

One FPB member who wished to remain anonymous, is also disappointed by the Government's Pre-Budget Report, particularly the VAT reduction.

"While I am not legally obliged to pass on this VAT reduction to my customers, it could cause serious damage to customer relations if I don't. Unfortunately because we are a small business and use the flat rate VAT scheme, our VAT liability has only been reduced by 0.5%. This will mean that I will lose 2% on each sale, at our busiest time of the year, with no opportunity to adjust our outgoings accordingly," said the FPB member. "The Government has also simply advised me to contact my software provider or supplier for assistance in adjusting my accounting software."

"I think this shows a lack of understanding of how a small business works. It is going to take my time and most likely cost me more money, not to mention the time spent reprinting all my price lists and making adjustments to my website. All of these added expenses will equate to at least one month's salary for one of my employees, which will mean that we will now be seriously considering reducing hours or making a redundancy."

The FPB believes the Government could have taken more progressive measures to support small businesses in the Pre-Budget Report, including cutting the lower rate of corporation tax to 20%. Instead it has simply delayed its planned increase to 22% for a further year.

In addition, both business-owners and their staff will lose out when National Insurance (NI) is increased by 0.5%. This is likely to prove a disincentive to employment at a time when small businesses are recovering from recession and are in a position to take on staff again.

Small firms which have concerns about the VAT reduction can contact the FPB's member helpline for advice and guidance on 0845 130 1722.