Business lobby groups have reacted with concern that the collapse of the Armstrong Group could reignite calls for compulsory employer contributions to pensions.
Automotive manufacturer Armstrong, which employs 450 people, went into administration after failing to reach a settlement over its deficit.
It had been in protracted negotiations with its pension fund trustee for two years after a #36 million debt.
"We understand many will see compulsory contributions as a way to avoid large deficits," said Brian Morris, spokesman for the Forum of Private Business. "But they would be disastrous for small businesses, which already have enough financial pressures."
Mr Morris also pointed out that the majority of SMEs were unlikely to rack up a deficit of the size of Armstrong's.
Mike Cherry, West Midlands policy development officer for the Federation of Small Businesses, said this was the result of the Government's pensions crisis and it was not small business's responsibility to solve it.
"A three per cent compulsory employer contribution, such as the one originally suggested by Lord Turner, would be a tax too far for small businesses.
"The bottom line is that most small employers simply cannot afford it and we could see even more firms forced under." In November Lord Turner recommended a new national pension savings scheme - dubbed the BritSaver - that would be made up of compulsory contributions from employers equivalent to three per cent of earnings, four per cent from employees and tax relief equivalent to one per cent.
A survey published yesterday by Bibby Financial Services suggested SMEs would suffer a "significant" dip in profits if they were forced to make contributions to work-ers' pensions.
A survey of 300 companies showed that a third believed compulsory contributions would hit expansion plans. A similar number warned that investment in business growth would be reined back.
Bibby said its research also suggested that recruitment would suffer and staff benefits would be cut.
David Robertson, chief executive at Bibby Financial Services, said the Government should consider the impact of compulsion on businesses.
"Business owners and managers make a significant contribution to the economy and any demise in their prosperity could have a serious knock-on effect across a wide range of industry," he said.
However, the survey caused outrage amongst organisations representing employees.
"How come the prosperity and economic health of small and medium sized firms is always dependent on driving down the pay, terms and working conditions of their employees?" said Tony Woodley, general secretary of the Transport and General Workers Union.
"I'd like to see a report which shows employers benefit by working with unions to have safer workplaces and a well paid, more stable and productive workforce." ..SUPL: