Small businesses in the West Midlands face £800 million bill for regulation

25 June 2009

Email article : Print article : More articles like this

Small businesses in the West Midlands lose more than £800 million every year due to Government red tape, new figures have shown.

Research carried out by the FPB has found that firms in the region spend around £807 million each year complying with legislation.

The figure, drawn up using feedback from FPB members, means entrepreneurs in the West Midlands face the sixth-highest bill in the country for carrying out the paperwork associated with running a small businesses out of a total of 12 regions.

The £807 million figure, based on the amount of company time and therefore money spent complying with the rules, includes £182 million spent on health and safety legislation, £207 million spent dealing with paperwork on employment law and £23 million on dismissals and redundancy.

The work associated with staff absences cost £34 million, costs associated with maternity came in at £20 million and the work related to disciplinary issues was worked out at £29 million.

The not-for-profit FPB is now urging the government to cut down on the burden of regulation for small businesses after its latest ‘cost of compliance' referendum survey found that, nationally, regulation costs the UK's smaller employers almost £12 billion per year.

FPB member Jeanie Cartmell, a partner with furniture and flooring retailer Solihull Supplies, 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, Solihull, employs a total of six people and 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."

She added: "I think common sense has particularly gone out of the window with health and safety legislation – that's an issue that takes up a lot of your time."

Karen Wyatt, of Staffordshire family firm Canal Cruising Co Ltd in Stone, said as much as 80 per cent of her time could be taken up by dealing with paperwork.
She said the Crown Street business, which employs between six and 15 people, had seen a steady increase in red tape in recent years.
She said: "The paperwork we have to deal with now is a pain in the neck and very time consuming."

Nationally, the FPB's survey found that, on average, small employers devote 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 in April by Peter Mandelson, 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 in order to meet this target.

The FPB provides a member helpline, a 24-hour legal advice service and Health & Safety and Employment Guides in order to help small businesses to comply with legislation. In addition, the organisation has recently launched an online video advice portal, www.smallbusinesschannel.co.uk, and has joined forces with Cardinus, a subsidiary of THB Group, to provide online health and safety training.

Email:
eNewsletter archive

Small businesses in the West Midlands face £800 million bill for regulation

Related articles