The report claims that SMEs face a baffling array of conflicting, confusing and inconsistent quangoes, grants and agencies across the UK- including at least 2,650 schemes in England alone. Businesses, as a result, have turned away from the publicly-funded schemes because they do not know what help is available, do not trust the quality of advice on offer, or do not believe it will match their needs.

The cost to tax payers to provide this inadequate service is £8 billion a year. The Government's flagship agency, Business Link, for example, receives £140 million and is only used by one in seven firms (14%). And according to independent research, only 38% of those businesses, are satisfied with the general business information it imparts.

These findings are contained in the new CBI report - Improving Government Services For Small and Growing Businesses. It makes a series of recommendations including:

• Streamlining the services and support schemes on offer to reduce confusion and free up resources to improve those which are effective and add value.
• Filling a gap in the support network for small firms looking to grow.
• Improving training for advisers, especially those lacking a business background, to offer a higher quality of advice, particularly for firms needing strategic advice rather than nuts-and-bolts help.
• Ensuring any publicly-funded initiative reflects business demand and addresses a failure or gap in the existing market.
• Pressing government departments to work with the Small Business Service to create an enterprise culture rather than resist it.
• Regional Development Agencies must focus their resources on economic development and regeneration and ensure the business community is involved in development of regional policy.

Ian McCafferty, CBI chief economic adviser, said, "With UK levels of entrepreneurial activity stalling, and levels rising elsewhere in the world, it is more crucial than ever that government services help to deliver productivity gains for business.

"Quality business support is proven to boost survival and growth prospects so is essential to enabling an 'enterprise revolution.' However, there are too many overlapping, confusing and inconsistent schemes.

"Despite work to address the problem it is clear that much more progress needs to be made by government and the regional bodies who can work more closely with business.

"With £8 billion spent a year on services to small businesses they should be exemplary but this is not the case. Action is needed, not to reduce the budget, but to make sure it is effectively used."

Last August the CBI released its first report on the Small Business Service. It found red tape has increased since 2000, with businesses citing it as a major obstacle to growth and many businesses still finding it hard to access affordable or appropriate sources of capital.

Large regional discrepancies in business start-up rates exist and fewer people consider going into business now than in 2000, especially among woman, black or Asian entrepreneurs.

The number of new businesses operating at the beginning of 2004 increased by 0.3 million but at the same time those actually employing staff fell from 1.35m to 1.23m - reflecting, in part, concerns about employment legislation.