Proposed changes to anti-terrorism laws could result in extra costs for small businesses, an internet entrepreneur warns.

In an attempt to thwart terror attacks similar to that in London on 7 July, home secretary Charles Clarke has proposed new data retention laws which would require ISPs and telecoms companies to keep details of phone calls, text messages, faxes and e-mails for up to a year.

But Ben Cohen, founder of QuickQuid.com, said the government's plan would add to the cost of maintaining a website.

Writing in The Times Online, Cohen said large companies like Cable & Wireless, BT, Vodafone and Wanadoo should find it easy and within their budget to gather and store the required data.

Many small firms, however, may not find it so straightforward, he claimed.

"My website, for example, has its own "e-mail server", which would make my company, in effect, a service provider, because the server is used to provide e-mail addresses for members of staff," he said.

"I would be required to retain a copy of the details of every e-mail sent to and from my company. Thousands of other small businesses would be in a similar position."

Cohen added that extra software would be required to collect the data, adding to the cost of maintaining a website. These costs which would ultimately be passed onto the consumer, he said.

The entrepreneur also said there were other flaws in Clarke's plans.

"It is simply not feasible for the police to inspect every server to ensure that it is recording data; it is not even possible to prove that particular message details are not being stored.

"Also, terrorists could simply decide to base their e-mail server outside of the EU where the legislation would not be in force."

The solution to these problems, Cohen recommended, is the creation of an internet regulator linked to a global regulatory system that could be used for anti-terrorism intelligence.

Last week, the government's plans were backed by the European Commission.

EC President Jose Manual Barroso said: "It is obvious that data retention is a crucial instrument in the fight against terrorism: terrorists need to communicate between themselves and by doing so leave traces."