The majority of businesses are now planning to reduce staff levels in a bid to remain profitable in the wake of the global credit crunch.

A business confidence survey carried out by KPMG found that the number of companies planning on making staff redundant had doubled since the start of the year from 29% in the first quarter to 53%.

A similar figure (52%) said they would stop recruiting new staff in a bid to keep costs down.

Most (60%) of the businesses polled thought the downturn would last for a further one or two years, but a more pessimistic 20% predicted it would continue until 2013.

"The clouds that were on the horizon when we first conducted this survey back in early spring are now right overhead, with businesses now feeling the impact of this so-called ‘perfect storm' of rising inflation, tightening credit conditions and plummeting consumer confidence," said Malcolm Edge, regional chairman for KPMG in the north.

In a separate survey, the organisation also warned that small businesses would continue to be hit hard by larger companies taking longer to settle invoices.

The study found that 49% of companies with turnover ranging from £250m-£20bn intended to negotiate longer supplier payment terms, which would inevitably filter through the supply chain to smaller companies already struggling to make ends meet.

"Adopting the same old blinkered approach of squeezing your suppliers and delaying payments is a zero sum game where only a few winners will emerge," said Andrew Ashby, KPMG advisory director.

"Companies need to be more focused on gaining improved visibility and control of cash, and to work smarter across the supply chain to create win-win opportunities that reduce the cash cycle for all participants."

The research found that 75% of businesses are already experiencing with late payment and the same number has reduced access to credit. This compares to figures of 23% and 14% respectively in the US.