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Small businesses lose around 379m hours a year and spend around £36bn a year on dealing with red tape, new research has indicated, piling pressure on the Labour government to fast-track its deregulatory drive.
Business secretary Peter Kyle has emphasised that the government remains committed to reducing the regulatory burden on businesses by up to 25 per cent by 2030, a bold pledge that could support growth.
But new research has pointed to small business owners’ grievances with red tape and pains in attempting to sort concerns, with “swathes of red tape” preventing growth.
Just one in ten owners surveyed by the Federation of Small Businesses (FSB) said it was easy to resolve complaints and concerns on red tape.
Around 41 per cent suggested guidance by regulators was easy to understand while most said they did not get a quick response when they needed help.
Research by the industry body suggested that small and medium-sized businesses (SMEs) spent £36bn on regulation each year and lost millions of hours each year – equivalent to watching the Lord of the Rings trilogy around 33m times – in work on productive areas.
Tina McKenzie, FSB’s policy chair, said while rules were needed to allow for competition, “the pendulum may have swung too far in the opposite direction”.
“Think of all the time and money that could be invested in new products or processes, or expansion, rather than being used up trying to work out how an obscure or confusing rule applies to a particular small firm’s situation,” McKenzie said.
“Past governments have made all the right noises about simplifying and easing regulation, but their efforts have fallen short of what’s needed.
“Regulators themselves also have a huge part to play, and their commitment to helping small firms with compliance needs to be more than lip service.”
Small businesses demand tax reform
The Labour government has centred its deregulatory efforts around diluting powers held by the Financial Ombudsman Service, watering down planning red tape and pushing through digital changes in compliance.
But business groups have argued that the Employment Rights Act was set to hamper firms with additional labour costs. The government’s own analysis has suggested it will add up to £1bn in costs.
FSB officials have questioned whether the 25 per cent burden reduction target will be achieved if HMRC and Companies House are not accounted for.
They also warned that the regulatory policy committee, an independent body set up by the government to scrutinise red tape, did not have enough powers as regulators were not required to estimate the costs of new rules when they are introduced.
