Regulation burden erodes SME stability
According to the FPB’s latest Referendum survey on the ‘cost of compliance’, small business employers devote an average of 37 hours each month to complying with regulations. The FPB believes that reducing the time and cost of complying with legislation must not be sidelined, particularly as many firms are struggling to survive because of the recession.
The FPB’s Policy Representative, Matt Goodman, will attend a meeting of the Better Regulation Executive (BRE) on Friday, 26 June 2009. The meeting follows reports that the Government is not pushing through plans to reduce regulation following its scrapping of ‘regulatory budgets’ that had been earmarked for individual departments.
In addition, two committees on regulation announced by Peter Mandelson in April, the Secretary of State for Business, Innovation and Skills (BIS), have still not been set up. Further, in a recent blog on its website, and ahead of the publication of the Treasury’s forthcoming consultation on regulating lenders, the BRE said that ‘financial services [are] at the forefront of our issues now’.
“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,” said Mr Goodman. “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.”
He 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.”
Micro businesses (0 to 9 employees) spend an average of 33 hours per month complying with regulations, small businesses (10 to 49 employees) 48 hours per month and medium-sized companies (50 to 249 employers) 131 hours – equivalent to one full-time member of staff.
Employment law is the costliest bureaucratic burden, 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’s research.
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 spend 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.
Representatives from the BRE have been in discussions with small businesses from across the UK hoping to meet a target of saving £3 billion per year via reducing bureaucracy. While welcoming this engagement, the FPB believes that more must be done to meet this target.
Jeanie Cartmell, a partner with furniture and fixtures retailer Solihull Supplies, based in Birmingham, said she had been forced to take on an extra employee to help her deal with the burden of legislation.
The business, based on Lodge Road, Knowle, employs a total of six people. Mrs Cartmell agreed that smaller firms like Solihull Supplies are hit particularly hard by red tape. She told the FPB: “It’s quite ridiculous and it costs money left, right and centre.
“It’s really difficult to get through everything – it’s just very time consuming with all the paperwork. It’s so complicated and there’s a lot of time spent as a small business just complying to survive.”
“I think common sense has gone out of the window with health and safety legislation in particular – that’s an issue that takes up a lot of our time,” added Mrs Cartmell.