BRITAIN’S economy could take a £6 billion a year hit as small firms put the brakes on hiring staff because of Brexit, a report claims today.

A quarterly health check of small and medium-sized businesses[SME], compiled by lender CYBG and the Centre for Economics and Business Research [Cebr], forecasts that the average number of workers taken on each year will plunge between 2017 and 2022.

It estimates the sharp pull back in SME hiring could cost the UK economy dear, seeing the annual contribution to the UK's gross value added figure fall to just £4.8bn. This compares with around £10.9bn added each year to the UK economy between 2010 and 2017, according to the report.

Gavin Opperman for CYBG said the figures were a “wake-up call”.

He explained: “SME contribution cannot be underestimated. We must understand the pressures facing them and provide the right environment and support to help them flourish and continue being a major employer of the UK's workforce.

"In particular, we must give our small firms the access to talent they need post-Brexit and address how these firms can be incentivised to invest in skills."

The SME sector currently employs around 16.1 million people, roughly 60 per cent of the UK's total private sector employment.

A further survey of SMEs by CYBG on hiring plans for the rest of 2018 found that nine per cent of firms were expecting to cut the size of their workforce over the next six months while six per cent fewer SMEs were now planning to expand their workforce than the 58 per cent, which increased the size of their workforce over the past six months.

Firms said a worsening outlook for the UK economy was a large factor behind the reluctance to hire as well as rising employee costs and a reduced availability of skilled workers.

However, the latest SME health check index also offered some cheer with signs that the sector's overall health was improving with a reading for the first quarter of 2018 increasing by 3.4 points to 47.4 and ending five consecutive quarters of decline.

Mr Opperman said the report did show “signs of optimism" but he stressed it was still a “mixed picture and the Index is well below the level we have seen previously".

Meanwhile, another survey suggested one in 10 workers in restaurants, bars, hotels and other hospitality business was thinking of leaving the UK because of Brexit.

The snapshot from Planday, which describes itself as a workforce collaboration firm, also found that some managers in the industry feared they would be forced to close as a result of Britain leaving the EU.

A survey of more than 400 hospitality workers and 260 managers showed that the sector could face significant staff shortages.

Half of workers said Brexit had made the UK a less welcoming place to live while two out of five did not believe the Government understood or represented the needs of EU citizens who worked in hospitality in Britain.