New businesses can boost recovery, says report

12 July 2010

A study by a leading think-tank has claimed that reducing the obstacles to starting up a new business could push up economic growth significantly over the coming years.

The Centre for Policy Studies (CPS) has argued that lighter business regulation, which would make it easier for enterprises to flourish, and raising the retirement age by five years from 2020 onwards would add between 0.5 per cent and 0.75 per cent to annual growth figures.

That would be the equivalent of between £80 billion to £125 billion in GDP.

Encouraging a faster rate of business growth would, the report said, "slow the rise in, and then reverse, unemployment; make the problem of the public finances more tractable; and help to create an environment in which private sector investment would begin to lead growth".

The report put forward the case for easing business regulation so that new firms have the opportunity to start-up free from the burdens of red tape.

The CPS also recommended that the bankruptcy process for those enterprises that fail should be more straightforward.