Regulation and the small firm

Ever since the autumn of 2003, and up until the first quarter of 2008, government regulations and redtape has been the most important problem faced by small firms until it was toppled from its perch by the business climate and recession, according to the OUBS-based Quarterly Survey of Small Business in Britain. At that time, even though their priority was to deal with the effects of the recession, hardly any small firms believed that the time they spend on regulations and paperwork has decreased over the past year and 61% believe that it has increased.

Although the very smallest firms are exempt from some government regulations and paperwork, it is clear that the burden in terms of the proportion of working time spent on compliance falls most heavily on them. A large majority feel that regulation is unclear, complicated and disproportionate. Only one in ten believes that the government consults well with business before introducing or changing regulations.

However, this is not just a whinge against big government. A vast majority of small businesses say that their view of regulation would be improved by better communication, earlier warning, more effective consultation and feedback on that process. Even more say their view would be improved by fewer and simpler regulations with less frequent changes. However, there is little sign that anyone is listening. Small buisness compliance is big business for government and professional advisors.

The Department of Business, Enterprise and Regulatory Reform (BERR) estimates that businesses in Britain ‘spend at least £1.4 billion each year on advice to help them comply with regulation’. The UK Trade and Investment estimate of the overall regulation advice market is £4.3 while ARK Business Analysis (a consultancy firm in this field) reports that ‘the government’s Regulatory Impact Assessments show an annual regulatory impact on UK business in employment and safety per year of £11 billion and climbing’.

However, another survey conducted by the small enterprise team at OUBS among more than 1,000 professional advisors revealed that the time taken to deal with their own government regulations and paperwork has increased and 71% believe that the time it takes their clients has increased over the past year. They confirm that the government does not consult well enough about regulations and that they are generally unclear and complicated (and that in many cases industry certification should be considered).

Most agree with small firm owners and do not think that the government understands business well enough to regulate. Better communication about what government is doing and guidance on regulations would be welcome, as would better consultation and feedback on that process. Echoing small business owners, the most welcome changes, would be fewer and simpler regulations, with less frequent changes. In fact, the government does have a taskforce that aims to reduce regulation but Britain’s small firms and their advisors are still waiting to see if the government, distracted by the recession, listens to their views.

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