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Government funding for small to medium-sized enterprises (SMEs) needs to focus less on risk aversion and accept occasional failures alongside successes, one leading scientific membership organisation has argued.

The Institute of Physics said the small business research initiative that provides direct funding assistance as opposed to tax breaks has in some cases hampered innovative research and development work.

This was due to prevailing cultures within government departments and funding bodies that have placed too much emphasis on business continuity and stability, said technology and innovation policy office Alex Connor.

He added: "Selecting solutions to procurement requirements on the basis of short-term costs can disadvantage novel and innovative solutions to problems and may not result in the most cost-effective long-term policy."

Mr Connor defended the ongoing emphasis on the procurement process but said it should not focus solely on short-term costs, which are often a poor indicator of promising technologies in their nascent stages.

According to a recent survey by Connect, the two biggest IT headaches for businesses were 'everyday hassles with IT' (37 per cent) and 'security concerns' (32 per cent).