Regulations taking their 'toll' on small businesses

The government has been urged to do more to reduce the adverse impact of regulation compliance on smaller firms following a study that claims red tape costs employers some £12 billion a year.

The call has come from the Forum of Private Business (FPB) which carried out the survey.

Those firms that responded to the study indicated that, on average, small business employers are spending 37 hours a month making sure they comply with regulations.

Specifically, micro businesses, those with 0 to 9 employees, devote an average of 33 hours per month complying with regulations; small businesses (10 to 49 employees) 48 hours per month; and medium-sized firms (50 to 249 employers) 131 hours.

Employment law is seen as the most demanding in bureaucratic terms, costing small businesses £2.4 billion per year. Health and safety administration costs £2.1 billion and tax £1.8 billion per year, according to the FPB.

The average time per month spent on employment red tape (dismissals and redundancy, discipline, absence controls and management, parental leave, and holidays) is ten hours. For health and safety, it is eight hours.

Business owners reported spending an average of seven hours each month on tax administration, four on building and property regulations, four on standards, three on environment and waste regulations, and an hour per month on equality and diversity.

Worries over the future of plans aimed at curtailing the administrative burden of regulation compliance have emerged after the government decided to drop the regulatory budgets which were intended to limit the overall cost of the rules produced by individual departments.

The Better Regulation Executive (BRE) has been holding discussions with small businesses in an effort to save £3 billion a year in compliance costs.

The FPB said that it welcomed the initiative taken by the BRE but added that much more needs to be done if the target is to be achieved.

Matt Goodman, the FPB’s policy representative, commented: “As part of a new department with a broader remit, the BRE must continue to put the smallest businesses at the forefront of its plans to change the culture of bureaucracy in the UK.

“Our research shows that complying with red tape remains one of the major cost burdens facing smaller businesses, swallowing up valuable time and money that could be used more profitably elsewhere.”

Mr Goodman added: “In addition, at a time when protecting both workers and businesses should be a priority, regulations are increasingly burdensome as businesses take on more staff.”