Many would-be entrepreneurs fail to start their own business because they are scared off by the myth that most firms fail within their first year.

In fact 80 per cent of new businesses survive their first 12 months of trading, according to news yesterday from the Department of Trade and Industry.

The DTI, which will run a new campaign through its Small Business Service, said many were discouraged from taking the plunge because of false information about the difficulty of launching a start-up.

Common misconceptions include that it takes years to start a business from scratch and that it is difficult to make an adequate living from a start-up.

However, the Government said its research suggested most businesses were established within six months and estimates of income in their first year of trading were around half of the average figure achieved by small businesses. It also said the rejection figure for business loan applications was lower than most people believed. Only ten to 20 per cent of applications are rejected, the DTI said.

Minister for Competitiveness Barry Gardiner said: "Prior to entering Parliament I too started and ran a business.

"Before making the first step I - like others - was faced with potential concerns.

"Many of these turned out to be misplaced and I am glad I made that leap into business. I want many others to do the same.

"There are now a record 4.3 million small businesses in the UK - this is over 500,000 more than seven years ago.

"Small businesses and start-ups make a major contribution to the health of the economy, increasing jobs, productivity and prosperity, it is therefore essential that the myths surrounding starting up a new business are dispelled."

Paul Hanna, senior enterprise manager for Birmingham Chamber of Commerce, said, whilst many start-ups were successful, founding a business still involved risk.

"That 80 per cent of businesses survive still means one in five fail.

"Entrepreneurs have to work hard to make sure they fall into the right side of that statistic. Too many enterprises don't make it past the first year because they lack the right advice and information."