Cameron's 'can-do' Britain has 20,000 fewer companies

Businesses are closing down at an alarming rate as the Prime Minister's spending cuts begin to bite

David Cameron's claim to be the champion of new business was undermined yesterday as new figures showed the number of firms in Britain fell by 20,000 during his first year as Prime Minister.

In a sign of a more robust approach to the Government's economic policies, Labour's new Shadow Business Secretary, Chuka Umunna, seized on the figures to accuse ministers directly of "hampering business creation" through deep spending cuts.

Ministers have been told to find ways to stimulate the economy after the Office for National Statistics (ONS) downgraded growth estimates for the first six months of this year. In his Budget in March, Chancellor George Osborne declared he wanted Britain to become "the best place in Europe to start, finance and grow a business". But new figures released by the ONS reveal the number of firms registered for VAT or PAYE actually fell by 20,000, or 0.9 per cent, in the previous year. It is the first set of data showing what has happened to Britain's businesses since the coalition was formed.

Mr Cameron used his party conference speech last week to promise a plan that would do "everything we can to help businesses start, grow, thrive, succeed". In the wake of his speech, the Federation of Small Businesses demanded "clear action to match the rhetoric", while the manufacturers organisation EEF warned promoting growth is "now a matter of urgency".

This week there is expected to be a series of announcements from the Department for Business, the Treasury and No 10 on job creation, particularly in manufacturing, which lost 4,800 businesses alone. In March 2010, there were a total of 2.1 million businesses with VAT or PAYE registrations but a year later it had fallen to 2.08 million, according to the ONS.

Every region of the UK except Scotland and London saw a slump in the number of businesses. Construction and business administration were the sectors worst hit, down more than 4 per cent. By comparison, the number of finance and health firms grew. Last week, Vince Cable, the Business Secretary, admitted that despite government efforts to get banks lending to business, there remains "a problem with credit supply".

Mr Umunna said: "It is deeply worrying that the number of businesses in the UK has fallen since last year." The 32-year-old, elected an MP only in May last year, was catapulted into the Shadow Cabinet on Friday as Labour leader Ed Miliband sought to toughen up his attack on the coalition's policies. Labour strategists believe the public is becoming increasingly sympathetic to their charge that the Government is "cutting too far and too fast", which Mr Umunna said was "holding back growth".

He added: "The number of enterprises has fallen back; growth has flatlined and business confidence has been dented. The Government urgently needs to change course, come up with a growth strategy and get the banks lending to business."

According to the revised ONS figures, the UK economy grew just 0.1 per cent between April and June, compared with an earlier estimate of 0.2 per cent, while the first quarter was downgraded to 0.4 per cent from 0.5 per cent. This weekend, Nicolas Sarkozy, the French president, is due to hold talks with the German Chancellor, Angela Merkel, in a fresh attempt to rescue the euro and protect banks heavily exposed to Greek debt.

Sir Mervyn King, the governor of the Bank of England, intensified concern about the state of the economy when he warned last week that the UK could be facing "the most serious financial crisis" ever seen.

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