The industry body has called for a moratorium on new business regulations and a rapid simplification of "confusing bureaucracy" as it published its policy paper Regulatory Reform – a route to economic recovery.

It claimed a recent FSB survey found that one in three businesses was "scared off" expansion by complicated regulation and projected that, by removing regulatory obstacles, 55,500 jobs could be saved and 258,000 created.

In addition, FSB national chairman John Wright said that around half of firms planning to close or downsize were influenced in that decision by "the heavy impact of regulation".

In 2008, 57 new or altered regulations came into effect placing a heavy burden on small businesses in terms of understanding how to comply with the ever-changing regulatory landscape, as well as the paperwork and costs associated with compliance.

The FSB has called on the government to simplify a wide range of regulatory areas, such as maternity and paternity laws, discrimination laws and health and safety.

In addition, it has called for a specific date when all new legislation comes into force, caps on routine local authority inspections and a further 25% reduction in administrative burdens by May 2015.

"We must not underestimate the burden that unnecessary regulation puts on small businesses," Wright said.

"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."