Red Tape Deters Recruitment

April 5 2006 - Between them, small businesses in the UK are spending half a billion (500,000,000) hours each year meeting the demands of government regulations and paperwork, according to the latest NatWest/SERTeam Quarterly Survey of Small Business in Britain.

On average, each small business currently spends 26.7 hours a month filling in government forms and other paperwork. Sole traders suffer the most, spending an average of 8 hours per month (down from 8.5 hours in 2005) per individual trader compared with the 1.5 hours per employee (1.8 hours in 2005) in larger companies.

Thankfully, the overall trend has been for a reduction in the average time estimated to be spent on compliance and red tape by small businesses over recent years:

• 1999 - 4.2 hours per person per month
• 2003/2004 - 3.8 hours
• Currently - 3.7

Respondents cite dealing with VAT as the most time-consuming for mid-sized businesses, but aspects of payroll, particularly taxation and National Insurance follow close behind.

Nat West's media release states that employment laws, especially health and safety regulations, are continuing to have a detrimental effect on the growth of UK small businesses in the UK with 44% of small firms reporting that at least one aspect of employee health and safety regulations has a significant impact on their business because of the time, cost or inconvenience involved. This compares with 39% in 2003 and 2004.

Over a half of small businesses said that the burden of red tape has affected their employment levels:

• 37% reported that they have avoided employing more people
• a further 19% said that they reduced the numbers they employed because of the burden of employee regulation and paperwork
• 45% of businesses without employees had made a conscious decision not to be employers in order to avoid this type of regulation completely.

Pete Ferns, Director of NatWest Business Banking, said: "The Government constantly needs to look closely at what it can do to encourage growth in the small business community and cutting the amount of red tape, could be the way forward. Small businesses are the engine room of our economy and their success is paramount for the overall economic prospects of the UK."

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