Research for the Asphalt Industry Alliance (AIA).in highlighted the cost of wasted staff time, production delays, increased fuel consumption and vehicle damage repairs.
Sixty per cent of survey respondents said the condition of local roads had deteriorated over the last five years, and over half said the condition had worsened over the past year.
The 1.8 million SMEs in England and Wales employ 9.6 million people and have a combined annual turnover of £1,321 billion.
Poor local road conditions over the last 12 months affected 50 per cent of these SMEs, costing each an average of £8,333, making the total cost to SMEs of poor local road conditions £4.966 billion.
Almost a third (32 per cent) of survey respondents incurred additional costs due to lengthier journey times and used more fuel due to congestion attributable to poor road condition.
In addition, more than a quarter (27 per cent) experienced additional damage to their vehicles due to poorly maintained local roads.
Just one in 25 (4 per cent) respondents thought the local roads used by their business were very well maintained, while nearly 10 times as many (37 per cent) said their local roads were not very well maintained.
Alan Mackenzie, Chairman of the Asphalt Industry Alliance, said: “Properly maintained local roads play a vital role in helping drive the economic recovery; not only by reducing businesses’ costs, but also by enabling them to operate more efficiently and make them more competitive.
"The maintenance work to get local roads back into good shape can be started quickly, and would also secure and even increase employment in the road maintenance sector across the country.
“I urge Government to act now and give local authorities the additional funding they need to improve the condition of local roads, thereby helping SMEs boost the country’s economy”.
The research also showed the condition of local roads is more important to SMEs than the condition of motorways and dual carriageways, or proximity to an airport, railway hub or shipping port, when choosing the location for a new business site.
Two-thirds (66 per cent) of respondents said well-maintained local roads were important for their business, while just under 59 per cent said the same about well-maintained motorways and dual carriageways.
Funding road maintenance is recognised as being an issue. More than two-thirds (68 per cent) of respondents said they thought the money given to local councils by national government for the maintenance of roads should be ring-fenced.
When asked how road maintenance should be funded, the most popular option - chosen by two in three (66 per cent) respondents – was through road tax receipts.
Fuel duty was a clear second with 54 per cent, while general national taxes (30 per cent) and local taxes (24 per cent) were the next most popular options.