'Red tape as bad, if not worse, in America' claims study

Companies in the United States find running a business just as challenging and likely to be bogged down by regulation - if not more - than their UK counterparts, a report has found.

In findings that will shatter the image of American entrepreneurship widely held in the UK, the Cambridge-MIT Institute study, released yesterday, found concerns about shortage of skilled labour and access to finance were higher on the other side of the Atlantic.

The institute, a joint venture between Cambridge University and the Massachusetts Institute of Technology, interviewed 3,600 firms.

Its report, called the International Innovation Benchmarking project, claimed to provide, for the first time, a like-for-like comparison of the innovative behaviour of UK and US firms. Its findings included:

n US firms are even more concerned about taxation, legislation and regulation as a constraint on innovation.

n They are more worried about a lack of skilled labour and getting access to finance than British firms.

n Universities and businesses in the UK are doing more to link up with each other.

n Universities are not regarded by UK - or US - businesses as the key players in terms of collaboration, sources of knowledge used by businesses, or technology acquisition.

Ian McCafferty, the chief economic adviser at the CBI said he was "surprised" that businesses in the US found life just as challenging as those in the UK in areas such as workforce skills, access to finance, regulation, and even technology-related factors.

"Clearly the popular impression of the US - that it offers a much better climate for innovation than the UK - does not fully stack up," he said.

A 2005 study from the London School of Economics showed there was no reason for UK firms to be less productive than US firms which have about the same levels of regulation. It also found the main difference comes in terms of management style and practice rather than governmental regulations.