Welsh small businesses face £402 million bill for regulation

25 June 2009

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Recession-hit small businesses in Wales lose more than £400 million every year due to government red tape, new figures have shown.

Research carried out by small business lobby and support group the Forum of Private Business (FPB) has found that Welsh firms spend around £402 million each year complying with legislation.

The figure, calculated using feedback from the FPB's members and gathered as part of its quarterly Referendum ballot, means the country's entrepreneurs face one of the smaller bills out of 12 UK regions for dealing with the paperwork associated with running a small business. The £402 million amount was the 11th highest sum.

However, the figure, based on the amount of company time – and therefore money – spent complying with laws and regulations, includes £91 million spent on health and safety legislation, £103 million spent dealing with paperwork on employment law, and £11 million on dismissals and redundancy.

The work associated with staff absences cost £17 million, while dealing with maternity matters came in at £10 million and disciplinary issues at 14 million.

Cardiff-based FPB member Terry Scarfe, who runs specialist metal structure manufacturers Amrob Engineering Limited, said he did not doubt that hundreds of millions of pounds were lost by Welsh small businesses on compliance.
Mr Scarfe said filling out paperwork tied in with government rules and regulations was a huge burden on the Taffs Well firm

He said: "It costs us a fortune just to comply and it's not improving anything – it's just part of this blame culture.
"As long as you sign a piece of paper to say it's not your fault, it's fine."

Mr Scarfe also warned that the amount of regulations governing businesses was creating more rogue companies who ignore the rules and can afford to undercut responsible firms.

He said: "The more legislation comes in and the more paperwork you have to do, the more people go underground.
"We apply the health and safety regulations to everything we do but there's so many people out there who don't and don't have insurance. We're complying with all the necessary regulations so our prices are higher and we don't get the job."

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

The FPB's 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) tomorrow (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.

Welsh small businesses face £402 million bill for regulation

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