Small businesses in the North East face £277 million bill for regulation

25 June 2009

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Small businesses in the North East lose almost £300 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 £277 million each year complying with legislation.

The figure for the area, based on the amount of company time and therefore money spent complying with the rules, includes £62 million spent on health and safety legislation, £71 million spent dealing with paperwork on employment law and £8 million on dismissals and redundancy.

The work associated with staff absences costs £12 million, costs associated with maternity came in at £7 million and the work related to disciplinary issues was worked out at £10 million.

The overall £277 million figure, drawn up using feedback from FPB members, means entrepreneurs in the North East face the lowest bill in the country for carrying out the paperwork associated with running a small businesses out of a total of 12 regions. However, it could be a conservative one, according to one Newcastle-upon-Tyne business owner, who has told of the "ridiculous" amount of legislation he faces in order to provide vulnerable people with essential care in their homes.

FPB member Philip Parkinson, the owner of St Peter's Wharf-based Philip Parkinson Homecare, said he felt as though government departments showed an "us and them" attitude when issuing rules and regulations for small firms to follow.

He said: "I take my limited resources, invest them in my business, secure it against my own home and we employ people. We do all of these things and yet the government constantly wants to interfere with my business and tell me how to operate and no help is forthcoming with all of this red tape."

Mr Parkinson said Criminal Records Bureau (CRB) checks were a particular problem for care providers. He said he had to carry out the process on every new carer he recruits but as each costly check can take months to carry out, many would-be employees find work elsewhere, leaving his business significantly out of pocket.

Mr Parkinson added: "I wouldn't disagree with the FPB figures for the North East – if anything I'd say they are a conservative estimate. I'd say 30 to 40 per cent of my time is spent on regulation – it's just ridiculous, at the end of the day."

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

The survey found that, on average, small business 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.

Small businesses in the North East face £277 million bill for regulation

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