Businesses facing ‘a blizzard of fresh red tape and taxes’

Red tape has long been a thorn in the side of small businesses and despite numerous efforts to reduce the burden, somehow it just seems to keep getting worse.

The much vaunted Legislative and Regulatory Reform Act 2006 was supposed to make life easier for businesses and save £12bn over ten years. There have been some improvements no doubt, but overall, the general impression is that the burden is increasing - and it seems there are even greater problems just around the corner.

New research carried out by the British Chamber of Commerce (BCC) claims that employment regulations will cost UK businesses £25.6bn over the next four years.

The BCC refers to a "blizzard of fresh red tape and taxes" coming into effect between April this year and April 2014. Some of the more costly new laws include the Equality Bill which the BCC believes will have a one-off cost to business of £190m.

There is also the Agency Workers Directive which will create an annual recurring cost of £1.5bn from 2011, and the 2012 Pensions Reform which will create an annual cost of £4.8bn.

The BCC fears the cost of complying with the new regulations could deter companies who want to create jobs. That fear is given extra urgency because of research by the Federation of Small Businesses (FSB) which shows that many firms are choosing not to expand because of concerns over complex regulations.

A survey of its members showed 27% of those who wanted to expand did not go ahead because they are afraid of tackling the regulations involved. The same survey revealed that half of businesses planning to downsize or close said their decision was strongly influenced by regulatory burdens.

The FSB has also called on the Government to put a freeze on all new regulations - a move it estimates would help create 258,000 jobs and prevent a further 55,000 from being lost.

The Government has given no indication that it is prepared to introduce a freeze although it says it has saved businesses £3bn a year through its programme to simplify regulations and remove unnecessary paperwork.

In spite of this, small businesses are spending a total of £12bn a year on complying with various regulations, according to research by the Forum of Private Business (FPB).

A recent FPB survey of its members shows that employers in small to medium sized firms are spending an average of 37 hours a month on compliance.

Employment law provides the greatest challenge and costs small businesses £2.4bn a year dealing with issues such as dismissals and redundancy, discipline, absence controls and management, parental leave and holidays.

Health and safety administration costs £1.2bn and small firms also find themselves bogged down in tax administration, building and property regulations, and equality and diversity.

The costs seem enormous when quoted in this way and it's not surprising that many firms will try to save money by dealing with these issues in-house, or even by ignoring them and hoping they go away. However, it is usually safer and more cost-effective to get good legal advice to ensure that compliance matters are dealt with quickly and correctly.

This can save money in the long term and reduce the risk of creating problems unnecessarily - particularly in the area of employment law where failure to follow the correct procedures can lead to costly tribunal claims.

For more information contact Peter Sutherland on 0115 988 6714.