The government must change the regulatory frame work that governs small business to help provide the economy an economic stimulus, according to the Federation of Small Businesses (FSB).

The FSB have called for a cut to all new business regulation and for red tape to be simplifed to seriously tackle the challenging economic climate.

In a FSB survey 27% of respondents said that they wanted to expand but are put off by complicated regulation and of those businesses planning to down-size or close and 50% said their decision was strongly influenced by the regulatory burdens they faced.

"We cannot and must not underestimate the burden that unnecessary regulation puts on small businesses. Around half of all firms planning to close or down-size were influenced in that decision by the heavy impact of regulation. We know that small firms want to employ more staff and the government should be making it easier for them to do so, especially as we pull ourselves out of recession and into recovery," said John Wright, national chairman of the FSB.