The government’s £2,000 tax break for employers is a welcome step but won’t make a big difference to owner managed businesses, according to new research.

The Employment Allowance, which cuts the first £2,000 of national insurance contributions off employers’ tax bills, is meant to inspire more firms to take on new recruits.

It is aimed at smaller businesses, for which £2,000 could be a significant chunk of cash, and went live on Sunday.

But a new study by the Bank of Cyprus UK shows that 44 per cent of businesses think it will make “no real difference” to their businesses.

Meanwhile, 30 per cent admitted they didn’t know what the Employment Allowance was and one in 10 weren’t sure how it would impact them.

Just 15 per cent of businesses gave a wholly positive response, saying either they would hire new staff, improve wages for existing staff or invest elsewhere in the business.

The study of 500 businesses took place before the Budget. This week Downing Street sent hundreds of thousands of letters to businesses informing them of the new incentive.

Tony Leahy at Bank of Cyprus UK commented: “At a time when small businesses need government support to help nurture them through a fragile economic recovery, it is a concern that a significant percentage of businesses are not aware of this initiative.”