New EU data protection rules could cost small firms over £75,000 each a year, according to the Federation of Small Businesses (FSB) and the British Bankers Association (BBA).
They said new data protection legislation being discussed by Europe's justice and home affairs ministers on Friday 6 December has the "potential to place an undue financial burden on small firms".
Additions to current proposals from the European Parliament's Civil Liberties, Justice and Home Affairs Committee would require small firms, which hold details of 5,000 customers or more, to employ a data protection officer at "an estimated cost of £64,000 per year" - the associations said.
They would also be forced to conduct a data protection impact assessment "costing £11,200 per year" and carry out a compliance review every two years.
FSB research has found that one in five (19 percent) of small firms already consider data protection to be the most burdensome regulation to comply with.
"The proposals from the European Parliament would only exacerbate the situation for many businesses", said the associations.
John Allan, national chairman at the Federation of Small Businesses, said: "If you are a small business with 4,500 customers on your mailing list you might reconsider plans to grow your business for fear of having to spend over £75,000 each year in order to comply with data protection regulations."
He said: "We are urging European leaders not to press forward with this law in its current form as small businesses would clearly suffer."
Irene Graham, managing director of business finance at the British Bankers' Association, said: "These new rules have the potential to place real burdens on businesses across Europe. We would urge EU politicians to reconsider their approach to ensure small businesses are not unduly affected."
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