In order to tackle unemployment the Government must stop all business regulation and simplify red tape, according to the Federation of Small Businesses (FSB).

The FSB claims these measures would create as many as 300,000 jobs and save a further 55,000 from being lost.

A survey from the organisation found 27% of businesses that want to expand are afraid to do so because of regulation and 50% downsizing or closing are doing this because of regulatory burdens.

John Wright, national chairman of the FSB, said: "We cannot and must not underestimate the burden that unnecessary regulation puts on small businesses. Around half of all firms planning to close or downsize were influenced in that decision by the heavy impact of regulation. However, 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.

"The FSB is urging the Government to give the UK's regulatory environment a strategic overhaul, to provide it with what will amount to a second economic stimulus, to boost growth and employment."