Business growth and employment in Bradford is set to fall, according to an accountancy firm.

Clough & Company is warning that the increases in National Insurance tax announced in the Budget will cause problems.

It says the one per cent rise in National Insurance payments for both employers and employees, which comes into affect in April 2003, will cause firms to take a long hard look at their finances.

Nigel Westman, partner and tax specialist at Clough & Company, said: "The impact that the one per cent increase on National Insurance will have on Bradford businesses is much greater than people initially realised when the Budget was announced.

"One per cent of firms' wage bills could be a much bigger percentage of their profits, and with less money to invest, this will have a negative impact on business growth in the region.

"Businesses are going to be less likely to employ more staff as the government has effectively made it more expensive to do so.

"Though the increases come into force next April, firms planning for the coming financial year will be budgeting for the extra cost now.

" They will be looking at ways to cut their overheads, by slowing their recruitment drive, or looking at ways to increase their profit margins to accommodate the tax increase.

"Businesses in Bradford that are likely to be hit hardest are those that are employee-intensive, such as the service industries, manufacturing and the professions.

"Larger firms with lots of employees will see their wage bills increase dramatically, but smaller firms will also suffer as generally they have fewer cash reserves and may find it more difficult to fund the additional costs of the tax."

The tax increase also applies to employee benefits.

Company cars, health insurance and other employee benefits will be affected in the same way with the Government taking an extra one per cent of the perceived value of the benefit in tax.

Mr Westman advises firms to reward staff in ways which don't attract NI contributions.

He says firms which have staff who own shares can pay them dividends from those shares instead of yearly bonuses.

He added: "Businesses can redesign their staff remunerations packages to make sure they can carry on rewarding their staff without being penalised by additional tax payments.

"Local firms can continue to grow in spite of this blow to their finances.

"There are ways to minimise the impacts and for small businesses there are cuts in corporation tax that will offset the NI increases."