The views of leading entrepreneurs could not be clearer, the government needs to introduce tax incentives and get the banks to start lending to small businesses and the government itself to provide financing stimulus, by way of loan guarantees.

Sir Richard, chairman of Virgin Group, said the UK government had to ensure confidence returned to the markets. "This will be tough and requires co-ordinated efforts from government, the Bank of England and high street banks" he said.

Interest rates must also be kept low, Sir Richard added. "People need some breathing space and need to feel confident to spend and invest. We also must ensure the benefits of the low interest rate are passed on fully - or else this will just help the banks recover their lost profits. Small businesses also need help from government to fee up funding and lending and to reduce the regulation that ties up so many entrepreneurs".

Some entrepreneurs want the government to be more radical than the 2.5 per cent cut in VAT (sales tax). James Caan, an entrepreneur and judge on BBC's Dragon's Den, said right now we need to stimulate the economy, reduce national insurance and encourage small businesses to employ people. "If you don't do that your are forcing businesses to lay people off. You are just compounding the problem by adding to the job queues and increasing the numbers claiming unemployment benefit", he said.

To put these proposals into action, Caan calls for a "tax holiday" for start-up firms. "The government should say that start-ups should pay no income tax in their first year. Any business that starts in 2009 should be given a 12 month income tax holiday.” In addition, Caan said any new company should not have to pay national insurance for its first twelve employees. "The government should give a stimulus package to new businesses that will spearhead us back to recovery", he said.

On a positive note, Julie Meyer, chief executive of Ariadne Capital, an investment and advisory firm, said a recession offered many opportunities. She forecast an "army of entrepreneurs" emerging this year. "We will see a mass army of people who have taken their skills to the market, and the government needs to create a culture in which entrepreneurship can flourish", she said. "We will see the surge of individual capitalism. I don't know of anyone who wants to work for a corporation and more; everyone is going freelance."

FT