New ESRC research on small and medium sized companies shows that SMEs are less competitive and innovative than ten years ago.

Forum Response: Economic and Social Research Council

Dr Andy Cosh, assistant director of the ESRC Centre for Business Research, said: "Findings show that today's small and medium-sized enterprises are less ambitious, less innovative and less growth-oriented than those in the last decade.

"The survey provides evidence that although the small firms sector is commonly seen as the main engine of the UK economy, smaller firms have a less innovative outlook than larger companies."

Forum Response: Institute of Directors

A spokesman for the IoD told ePolitix.com: "The increased burden of regulation in recent years, along with higher taxes has undoubtedly hurt the competitiveness of SMEs.

"Extra time-consuming bureaucratic demands distract businesspeople from actually running their businesses. Large companies have human resources and accounts departments to deal with red tape. Small companies should be given a break and allowed to grow their businesses."

Forum Response: Barclays

A spokesman for Barclays told ePolitix.com: "At Barclays we are surprised to see that the ESRC's research suggests a decline in ambition, innovation and growth among small and medium-sized businesses.

"Our regular research on start-up businesses has only recently demonstrated that the number of start-ups continues to grow, with 107,000 entrepreneurs taking the plunge in the first three months of 2003 up 12 per cent on the equivalent period in 2002.

"While a proportion of new businesses may be started by people whose material aspirations are no more than to pay the mortgage and have two holidays a year, overwhelmingly the 240 new business owners we help to get started every working day say they want to be their own boss, to try and fulfil their potential and to do something they love.

"Regardless of motivation, these businesses make a valuable contribution to the economy, providing necessary products and services, creating wealth and creating jobs.

"Our managers across the country tell us that from a practical perspective many owners of small firms find focusing on research and development difficult when they are also responsible for the other aspects of the business, from marketing and finance to human resources and complying with all relevant legislation.

"As firms grow, it becomes economically viable to employ specialists in these areas and consequently to devote more energy to R and D and business development activities. Having said this, we are always impressed at the innovation, creativity and drive of our small and medium-sized business customers."

Forum Response: Association of Chartered Certified Accountants

Robin Jarvis, head of ACCA's small business unit, said: "Dr Andy Cosh rightly points out that the small firms sector is commonly seen as the main engine of the UK economy.

"There is, however, great diversity in this sector which is often ignored and, therefore, a simplistic view should not be taken.

"Small businesses exist in every area of the economy and are established and managed by individuals of both sexes and from varying age groups, educational backgrounds and ethnic groups.

"This extreme heterogeneity means that they face different markets, use various skills and employ very different organisational structures to achieve a wide range of both personal and business goals.

"Consideration of these various factors would provide a more sophisticated analysis of the 'innovation' and 'growth' outlook for the three million enterprises which comprise the UK small firms sector."