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Hackers are increasingly targeting small to medium-sized businesses, costing them as much as £65,000 per attack, according to the Department for Business, Innovation and Skills (BIS).
BIS reported a marked increase in the number of attacks targeting smaller companies in its 2013 Information Security Breaches Survey, with a 10 percent increase in the number of SMBs suffering a data breach - with 87 percent confirming being hacked in the past year.
The attacks are also more severe costing the businesses up to six per cent of their turnover with average attack causing £35,000 to £65,000 worth of damage.
BIS confirmed it will be extending its Technology Strategy Board's Innovation Vouchers scheme to small and medium enterprises to fight the growing threat facing them. The scheme will allow SMBs to bid for up to £5,000 worth of funding from a £500,000 fund to invest in cyber security.
BIS will also publish new guidance designed to help small businesses improve their cyber defences. UK government minister for universities and science David Willetts praised the scheme, saying it will help the country's ongoing Cyber Strategy.
"Companies are more at risk than ever of having their cyber security compromised, in particular small businesses, and no sector is immune from attack. But there are simple steps that can be taken to prevent the majority of incidents," said Willets
"The package of support we are announcing today will help small businesses protect valuable assets like financial information, websites, equipment, software and intellectual property, driving growth and keeping UK businesses ahead in the global race."
The UK cyber strategy was announced in 2011 when the UK government pledged to invest £650m to improve the country's cyber defences. The strategy has seen the government announce a raft of strategies including the creation of new best practice guidelines for businesses and a Cyber Security Information Sharing Partnership (CISP).
BIS also reported seeing a marked spike in the number of attacks targeting larger enterprises, with 93 percent reporting breaches in the past year. Each incident cost the company between £450,000 and £850,000 in damages.
PricewaterhouseCoopers (PwC) information security director Andrew Miller said the problem will continue until businesses of all sizes rethink the importance of cyber security and start making smarter investments.
"Organisations also need to make sure that the way they are spending their money in the control of cyber threats is effective," said Miller.
"Spending on cyber control as a percentage of an organisation's IT budget is up this year from an average of eight percent to 10 percent, but the number of breaches and their impact is also up as well so it is clear that there is work to be done in measuring the effectiveness of the security spend."
BIS findings mirror those of the UK's National Audit Office, which warned that even with the new spending the ongoing cyber skills gap will last a further 20 years costing nation £27bn a year.