THE government has failed to create the enterprise climate for small firms it pledged, according to a hard-hitting report from the CBI today.

It concludes that Labour has missed most of the targets it set itself on encouraging the development of small firms, instead presiding over “increasing regulation and uncoordinated delivery of government support”.

Sir Digby Jones, director- general of the CBI, said: “The government was right to set up the Small Business Service and right to set it clear targets. But with more than half the targets missed it is clear more effort and co-ordination is needed across government — especially to ensure that the work of the SBS is not undermined by other departments in Whitehall.

“The SBS is not to blame for these results. How can an enterprise economy break through when the government presides over stifling red tape, a discredited planning regime and a society that becomes more politically correct and risk-averse by the day?”

The CBI has conducted a detailed analysis of the seven targets the government set out five years ago. Four have not been met, it said. These are building an enterprise culture; encouraging entrepreneurs in disadvantaged areas and among under-represented groups; improving regulation; and creating a positive environment for small-business growth.

But it gives the government credit for meeting three targets: improving access to funding, making it easier to start a business and making government more accessible and helpful.

The report shows red tape has increased in the past five years; many firms still find access to capital difficult, particularly in the £250,000 to £3m range, and small businesses are increasingly reluctant to take on staff. While the number of small firms has grown from 3.7m to 4.1m since 1999, those employing staff has dropped from 1.35m to 1.23m.

The proportion of adults going into business has fallen from 12% to 11%, compared with a government target of 14%. The self-employment rate has dropped among both blacks and Asians.

Planning is also a significant problem, it said, with many small firms unable to expand because of a system that is “too slow, too uncertain and liable to make poor decisions”.

The CBI analysis also shows fewer adults would consider starting a business now compared with five years ago. “The UK has a proud entrepreneurial tradition,” said Jones. “The next Richard Branson or Martha Lane Fox is out there, but they must be encouraged and supported as they take risks, and set up and grow their businesses.”

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