Controversy over number of start-ups

Government claims about the number of new small business start-ups have been challenged by the Forum of Private Business (FPB).

Answering recent questions from his opposition shadow, Competitiveness Minister Stephen Timms stated that on average 180,000 new firms per year had launched since 1997. He also asserted that there are currently a record number of small businesses in the UK.

However, FPB National Chair Len Collinson today argued that the major factor in this increase has been a move to encourage pre-existing small firms and "one-man-bands" to officially register themselves as businesses.

"There are no more employers than there were in 1997," Mr Collinson said: "This increase in the number of small firms is all about more companies without employees."

A study by the European School of Management (ESM), commissioned by Conservative shadow Chancellor George Osborne, claims in its interim report that the proportion of small businesses achieving an annual turnover above £1m in their first five years fell from 29% in 1998 to 16% in 2006.

In the study, the ESM argues that only through an analysis of growth, rather than simply counting the total number of firms, can the strength of UK small business be assessed.

It also claims that, although the 4.4m small firms registered in 2006 was an improvement on 3.8m in 2001, the cost of complying with "employment red tape" increases the bigger a firm gets.