Sussex firms are in danger of “sleepwalking” into trouble, a business leader has claimed.

The UK is expected to emerge from recession next month and recent data on retail figures and house prices has pointed to further “green shoots” in the economy.

But Tony Mernagh, executive director of the Brighton and Hove Economic Forum, said the positive news might lead firms to become complacent, which could prove disastrous in the coming months.

He warned: “I fear we are in danger of sleepwalking into three very tough years ahead.

“Next year, after the election, and probably two years after that, will be typified by tax increases on VAT and income tax, public spending cuts, rising unemployment, wage freezes, rising fuel costs, stagnating house prices and a fragile banking sector warily scrutinising every loan application.

“On top of this, more than half of the Brighton and Hove workforce is employed in the two most vulnerable sectors – business and financial services and the public sector.”

Mr Mernagh gave his stark assessment of the economy at the annual meeting of VisitBrighton, the tourism arm of Brighton and Hove City Council, and its business partners.

One of the invited guests was Sue Addis, owner of Donatello and three other Brighton restaurants, who is worried about VAT returning to 17.5% in the new year.

She said: “Things are not going to get any easier. We have got VAT going back up and I think it’s inevitable we will be paying more tax.

“Our problem is the strength of the euro. We buy all our goods from Italy but we haven’t increased the prices we charge. I think we will continue to weather it through without doing so but it is hitting our margins.”

Adam Bates, head of VisitBrighton, added: “The information Tony was providing was factual and there is no point in people being unaware of the issues we face.”

But despite the gloomy outlook, Mr Bates is upbeat about the city’s tourist sector. He said: “This year was supposed to be dreadful but we had a lot of success in tourist terms by working with business in the city.”

Mr Bates said he was “confident”

the domestic tourism market would hold up next year and the exchange rate would continue to make the city an attractive destination for foreign visitors.

Andy Pear, of Brighton-based Tenon Recovery, shared Mr Mernagh’s concern about the coming year.

He said: “As insolvency practitioners we are not as busy as we thought we would be at this stage. This could be because of the low interest rates and that Revenue and Customs has extended its Time To Pay scheme over VAT arrears. However, I think we are storing up trouble for next year.”

Mr Pear agreed the financial services and public sectors would be particularly vulnerable.

He added: “I think it will get worse before it gets better. Unemployment is still rising and the UK is probably going to be the last country in Europe to get out of recession.”

Expected cuts in the public sector have prompted fears of strikes action from unions.

Alex Knutsen, the secretary of the Brighton and Hove branch of public sector union Unison, said he was expecting the city council’s budget to be slashed by up to £60 million in the next three years.

He added: “The question is, do we raise taxes or cut public sector services? With cuts at this level, anyone who says they won’t hit frontline services is talking rubbish.”

One solution could be a “Tobin Tax”, a tax on all trade of currency across borders.

According to Mr Knutsen, setting this at 0.5% or 1% could raise up to £20 billion.

He added: “This recession was caused by very well paid people gambling with public and private money.

“Why should the public or private sector have to pay?”

Mr Mernagh said employers should be acting now to ensure they survive the trouble ahead. He added: “Firms need to do their ‘what if’ cashflow forecasts and establish levels of support in case the worst scenarios happen.”