Press Room

Small Businesses Spend 500 Million Hours on Red Tape
(1 February 2005)

Small businesses in the UK spend 500 million hours dealing with red tape each year, according to the latest NatWest/SERTeam Quarterly Survey of Small Businesses in Britain.

The average small business spends 23.3 hours per month completing the required government paperwork, increasing to 73.1 hours for those firms with over 25 employees. That said, the burden of regulation falls disproportionately on sole traders, as the average one person band spends 8.4 hours a month completing government paperwork, whereas the average person working in a company with more than 25 employees will only spend 1.8 hours a month.

Small businesses report that the main areas of concern with government paperwork are VAT and employee taxation, with 60% and 55% respectively putting them in their top three. The third main area of concern, health and safety regulations, has a significant impact on 39% of small firms because of the time and cost involved in ensuring compliance.

Whilst the survey found that respondents actually reported a decrease in the effects of government regulations in the last quarter, 57% nevertheless felt that overall the time that it takes to deal with paperwork related to red tape has increased over the last year. Employee regulations in particular appear to be one of the biggest bugbears for small firms, with over two thirds saying that there was too much regulation regarding the employment of key staff.

Of more concern, however, is that over half of the small firms questioned in the survey report that the burden of employee regulation and paperwork has had an effect on their employment levels. Over a third (36%) report that they have avoided employing more people, while a further 18% said that they have actually reduced the numbers that they employ. Working time regulations is the only area of government red tape that has seen a reduction in its impact in the last year.

Pete Ferns, Director of NatWest Business Banking, said: "Government regulations continue to cause concern for small firms across the UK, although it is good news to see that there has been a respite in the last quarter. It is a great concern however that businesses are thinking twice about creating employment opportunities because of the burden that it places on them."

Notes to editors:

  • The NatWest SERTeam Quarterly Survey of Small Business in Britain is carried out by the Small Enterprise Research Team, an independent charity based at the Open University Business School.
  • Copies of this and previous surveys are available at a cost of £40 each or £120 for one year's subscription from Small Enterprise Research Team (SERT), Open University Business School, Walton Hall, Milton Keynes, MK7 6AA. Tel: 01908 655831.
  • Small businesses wishing to participate in this survey, should telephone 01908 655831 or complete the survey online on www.serteam.co.uk. There is a free copy of a summary of the survey findings for those completing the questionnaire.

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