The suggested scheme would see organisations paying at least one graduate recruit a year to set up a business rather than come to work

UK needs start-up support to rival Silicon Valley

Businesses need to do more to nurture entrepreneurship within the technology sector if the UK is to compete with California, a leading think tank has said.

Policy Exchange is calling on firms to sign up to a 'start-up superstar' scheme as part of its Technology Manifesto, launched today in association with Google and cloud computing giant EMC.

It would see companies and public sector organisations paying at least one graduate recruit a year to set up a business rather than come to work, while also guaranteeing them a job should the venture fail within two years in return for an equity stake.

According to the report, the internet economy is expected to account for more than 12 per cent of UK GDP by 2016, making growth of the digital sector crucial, but it argues regulation too often reflects the pre-digital era and says start-ups need to be encouraged if the UK is to compete with Silicon Valley .

Its author Eddie Copeland said: "Enterprise and innovation is the lifeblood of a market-based economy. For policy makers it is not sufficient simply to assume that the basic building blocks of economic policy designed for previous eras will work for the next generation of digital businesses.

"To make Britain the most attractive place outside of Silicon Valley for technology entrepreneurs to start and grow a business, we need to encourage our brightest and our best to take risks."

James Petter, senior vice president and managing director for EMC in the UK and Ireland, added: "The UK has an opportunity to be the home for digital entrepreneurship...It's up to UK businesses and policy makers to seize the opportunity for ourselves."

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