The former CBI head will also warn SMEs that they run the risk of missing out on the millions of pounds available through the European commissions' seventh framework programme for research and development (FP7).

"Companies are missing out on millions of pounds of FP7 funding and therefore investing less in R&D. UK firms spent less on research and development than either Germany or France," he said.

Jones will be speaking at a conference next week (26 July) organised by research and development company Pera, where he will argue that more needs to be done to help SMEs lead the economic recovery.

"This country is only going to get itself out of this economic malaise if we trade our way out of it," he added.

Jones said "If you ever analyse the first year out of a recession, it's always the small business sector that pulls the country out; it is the sector that starts to employ first, the sector that grows wealth again first. The small business sector is key to economic recovery.

According to Jones, by cutting regulation and paperwork, the coalition government would allow SMEs would be able to do business easier."

If they and the EU were to do one thing to help SMEs it should be to cut regulation and the paperwork and make doing business easier.

"In the EU, SMEs employ 75m people in the private sector and are an essential source of growth and innovation. It is vital that the Government and banks do more to unlock the potential through research and technological," he added.