Small business

Michael Imeson considers the latest on SMEs

Small business organisations in the UK are mounting a concerted attack on the excessive regulation that is strangling enterprise, aiming at what is probably the Government's weakest point - its repeated claims that it will scrap unnecessary red tape, but its constant failure to do so.

The Federation of Small Businesses is leading the assault. Its allies on other fronts include the Institute of Directors and the British Chambers of Commerce.

The FSB alleges in a report published last month that 'a 20-year drive by policymakers to craft proportional, consistent and targeted regulation has failed to deliver the better regulations that small businesses look for'.

'More than 10 years ago businesses were promised a 'bonfire of red tape', and more than five years ago, Tony Blair guaranteed that no policy proposal would be considered without a comprehensive Regulatory Impact Assessment (RIA)', yet the mountain of rules continues to grow, says the report, entitled Better Regulation: Is it Better for Business?

The report reveals that small employers spend five times as many hours per employee dealing with regulation than large companies, and spend 4% of their annual turnover on compliance. The FSB is calling for RIAs to consider allowing small businesses to be exempt from certain regulations.

The Institute of Directors has published a survey which concludes that red tape is tying down businesses. One example given is of a building firm ordered to install a speed hump in a housing development by the local council, and then charged £12,000 for the council to 'supervise'. The actual cost of constructing the hump was £3,000.

'Employment regulations crop up time and again in this red tape dossier,' said James Walsh, head of regulatory affairs at the IoD. 'The Government should consider giving business a time-out until at least 2010 before it presses ahead with further extensions of employee rights on issues such as flexible working, maternity pay and parental leave.'

The British Chamber of Commerce is running several initiatives to combat the burden of bureaucracy. A survey of members published last month highlighted the difficulties of dealing with numerous regulators, such as the Health and Safety Executive, Food Standards Agency, the Environment Agency and local trading standards departments. Members said that dealing with enforcers was difficult, time-consuming and confusing, and that enforcement levels were often inconsistent and dependent on an individual officials' interpretation of the law.

Sally Low, the BCC's director of policy and external affairs, said: 'We've also published a study on how the British Government gold-plates EU directives. More work is being done on this and there'll be policy announcements before Christmas.'

When the Conservatives published a plan in August to reduce the flow of regulation affecting businesses, David Frost, BCC's director-general, 'warmly welcomed' its proposals. The BCC maintains a Burdens Barometer database which collates information from Government RIAs - it calculates that the total cost to British business of regulation introduced since 1997 stands at £30bn.

So what is the Government doing? On the one hand, it appears it is doing a lot. The Hampton Review, for instance, set up by the Chancellor to look at whether regulation is enforced fairly, is due to report mid-autumn.

'There are a number of other initiatives to help small firms cope with regulations' which have been recently introduced or are being considered, said a Department of Trade and Industry spokesman. These include the possibility of introducing 'common commencement dates' for UK (but not EU) regulation, and the likelihood of an on-line 'at-a-glance' summary of new regulations.

On the other hand, closer examination shows these efforts are largely focused on helping smooth the flow of regulation. Little or nothing is being done to roll it back.

Michael Imeson is editor of Eclectic, an Institute of Financial Services magazine, and director of publishing agency Financial and Business Publications.