Report questions entrepreneurial rate

The study by Robert Huggins and Nicholas Williams from Sheffield's management school found that business start-up rates across the UK have fallen since 1997, while self-employment rates remain the same.

Dr Huggins said: “Since Labour came into power there has been an increased dependence on public sector employment. This has had a huge impact on promoting entrepreneurship.”

The researchers said the key to encourage fledgling businesses is for ministers to make long term commitment to lower taxation, reduce the size of government, providing effective support for potential entrepreneurs and foster enterprise in schools.

The findings have been seized on by the Conservatives in Westminster.

Shadow Chief Secretary to the Treasury Philip Hammond said: “This study shows that despite 10 years of Gordon Brown’s rhetoric about supporting enterprise, small businesses in Britain are being slowly strangled by red tape and stealth taxes, including the tax hike on small firms in the last Budget.”

But a spokesman for the Department of Business and Enterprise said: “The World Bank ranks the UK first in Europe, and puts the UK in top ten globally, out of 175 countries, in terms of ease of doing business, which suggests the Government is creating the right business environment.

“The Sheffield report recognises positive measures have been put in place by the Government. There is still more to do and the new Department for Business and Enterprise has been established to foster the best conditions for enterprise.”