Regulations costing businesses billions annually

Small firms are spending a collective £16.8 billion a year complying with business regulations, it has been claimed.

According to research conducted by the Forum of Private Business (FPB), Government initiatives to reduce the amount of red tape faced by firms have yet to have an impact.

Some 84 per cent of the FPB membership that took part in the survey reported an increase in time spent complying with legislation since 2009.

Two thirds claimed to be investing more money on external consultants to help them avoid legal pitfalls.

The FPB estimated the total annual cost of compliance for the UK's smaller employers at £16.8 billion, with £11 billion going on internal costs and £5.8 billion on external contractors.

The figures work out at an average of £14,200 per firm per year.

Managing tax has become the top regulatory burden for small business owners, with tax-related regulation deemed to be the most costly area of red tape.

The bill for this came to £5.1 billion, the FPB said.

Second on the list was employment law - costing £4.2 billion - followed by health and safety law at £3.8 billion.

Apart from the actual cost of compliance, the poll suggested a secondary form of loss. Businesses reported they have missed out on business opportunities worth £29.8 billion because of the time and resources that need to be devoted to coping with regulatory admin.

One in five (21 per cent) of respondents believed that the energies soaked up in compliance have resulted in poorer business performance.

Some 18 per cent thought it adversely affected the motivation of employees, and 5 per cent felt compliance would hamper employment opportunities in the future.

While 16 per cent of businesses said they have actually seen an increase in the control they have over their business as a result of regulation, 36 per cent blamed being made to comply with legislation on leaving them with less control.

The research also found increased frustration with the Government for its failure to reduce red tape after several years of apparent inaction.

In fact, many businesses were concerned that overall legal requirements placed on smaller employers have increased since the Coalition came to power. There also appears to have been no improvement in the guidance, explanation and support small firms are given when new laws are introduced.

Jane Bennett, the FPB's head of campaigns, commented: "Despite several government initiatives - some more effective than others - it is clear that we are heading in the wrong direction as far as reducing regulation for small business owners is concerned. We simply want these measures to work properly and for the voices of the UK's business owners to be clearly heard.

"We also want the authority of the Local Better Regulatory Office (LBRO) to be maintained following its move into the Government's business department, and targeted support, sympathetic enforcement and grading of compliance would be helpful."

Ms Bennett added: "The Regulatory Policy Committee has been established to ensure legislators take full account of the impact of regulation on small businesses. We fully support its work in rejecting inadequate impact assessments and recommend it continues to refuse to endorse any regulations that have not taken into account the impact they have on small businesses."