Many small-business owners have serious misgivings about the Government’s ability to liberate them from the burden of red tape, a new study suggests.
The survey, carried out by the Forum of Private Business (FPB), chimes with another recent report by the Better Regulation Executive (BRE) on the impact of regulation on the UK’s small businesses.
The FPB found that just 40 per cent of respondents on the Forum’s Red Tape research panel said they did not think the Coalition would significantly reduce the amount of legislation with which small firms have to comply.
A further 32 per cent said they did not know whether or not the Government would succeed in reducing regulation, while 28 per cent felt confident that it would make a noticeable difference to the rules SMEs face.
The main reason respondents gave for doubting the Coalition’s ability to cut red tape was the failure of similar past initiatives, although nearly 90 per cent of those surveyed also said they feel that legislators do not understand how regulations affect small employers.
The Forum’s research manager, Thomas Parry, said small firms might be expected to have a fair amount of faith in the Coalition’s pledge to cut red tape, but the survey’s findings did not bear this out, with many SME owners feeling as though the UK is “past the point of no return with legislation”.
He added: “There’s a sense that because there is so much of it, and it’s so deeply embedded in our legal framework, any attempts to tackle it are doomed to failure.
“The level of change required – around a 50-per-cent reduction in terms of the time business owners spend on completing forms – is unlikely to be met without a radical rethink of legislation.”
The survey’s findings, particularly comments received about the complexity of business legislation, seem to correlate with themes identified by the Better Regulation Executive in its report, ‘Lightening the Load’, published last week.
The report surveyed 500 micro businesses and found that many organisations felt unsupported and were unreasonably expected to cope with the same levels of paperwork and regulatory obligations as larger companies.
Most owners estimated that they spent between one and two days every fortnight on dealing with regulatory compliance. Health and safety regulations are still widely misunderstood, with businesses using the term to cover a range of regulatory areas – from environment to food safety – which adds to the difficulty of understanding the problems micro firms face, concluded the report.
Some of the findings also strike a chord with Lord Young of Graffham’s recent review of health and safety – not least the desire of many small-business owners to receive better cross-regulatory guidance from local-authority inspectors, and the pressures companies feel to seek specialist health and safety advice from consultants, some of whom the BRE admit could be “tempted to overstate the regulatory burden to either justify or extend their costs”.
The report also identified several reasons why small businesses are reluctant to employ more people. One factor highlighted is the cost of employers’ liability insurance, with reports of insurers providing quotes on the basis of £10m worth of cover when the legal requirement is that employers only have to be covered for £5m.
Chair of the BRE, Sir Don Curry, said he had been struck, during the report’s compilation, by the way that so many micro businesses are struggling to cope with regulations, adding: “It is clear that some firms actively avoid recruiting and expanding to avoid the bureaucracy, or perceived bureaucracy, involved.”
The themes raised by the BRE are likely to be considered by Lord Young in his new role as “enterprise tsar”, as he embarks on a review of what help is available to small firms, and how they bid for contracts from the Government.
