Red tape burden restricting small business growth

23/05/2016

Red tape has long been a cause of frustration for small businesses, but new research shows just how much of a burden it can be, with more than half (55%) of small business owners saying their company’s growth is being held back by the amount of time they have to dedicate to business administration.

The findings from the Federation of Small Businesses (FSB) revealed that the average small business owner spends over 33 hours every month in internal business administration – the equivalent to four days per month tackling the red tape.

The study also found that three-quarters of business owners spend more time than they would like on business compliance, tackling issues ranging from tax, employment law issues and insurance to dealing with workplace pensions, accounting tasks or health and safety issues.

Red tape is not just proving to be a waste of small business time and resource, it can also be a drain on cash flow too. FSB members spend an average of £3,600 on help and advice with tax compliance.

Government commitment to removing red tape

The government have committed to cutting £10 billion of red tape to help small businesses. The measures which have been introduced include increasing the ‘One-in, Two-out’ rule for new UK regulations to a ‘One-in, Three-out’ rule. So, for every £1 of new regulation introduced, £3 will now be cut.

Also, the Enterprise Act, which is now law, includes measures aimed at reducing regulatory burdens on businesses.

But, whilst industry leaders support the steps being taken to reduce red tape, there is an overwhelming sense that more still needs to be done to help small businesses to succeed.

Will Brexit reduce the burden?

With the EU referendum approaching, many businesses hope that a vote to leave would mean less red tape for small businesses. But Vince Cable, the former business secretary, has said that this is a “complete myth”.

In a press conference in London, where he was joined by Labour MP Chuka Umunna, the pair argued that most regulations small businesses find irksome emanate from UK governments and not the EU.

Umunna, the former shadow business secretary, said: “We should remember that domestic governments of all different persuasions have always found the EU a very convenient dumping ground for blame when businesses complain about red tape.”

It’s also important to remember that, whilst the vote is imminent, the repercussions of a vote to leave may not be seen for two years or more, so there will be a substantial period of uncertainty before we know what the alternative arrangements will be.

Cable said: “It’s a divorce. Divorces can be amicable, but very often they’re not and people become irrational and angry, and you don’t get what you want.”

What do you think? Will any of the measures above help reduce the level of red tape for small businesses? Please share your views in the comments below.