Regulation, SMEs

A necessary burden

“If you have ten thousand regulations you destroy all respect for the law.” Winston Churchill 1931

Although not one of the great man’s best known quotes this one sums up the attitude of many UK businesses. To state the obvious these are difficult economic times and many businesses are under great pressure just to survive.

Regulation can often be regarded by businesses as another hurdle to overcome. That is not to say that regulation is a bad thing per se. Most business people would accept there has to be some setting of standards and guidelines – at the very least to ensure a competitive level playing field and to provide some basic protections for employees and customers. Rather it is the number of regulations and the burden these regulations impose in terms of direct costs and staff time which are often seen by businesses as a real barrier to growth. So whilst the UK is ranked 10th out of 142 countries as a place to do business in the World Economic Forum’s Global competitiveness report 2011/12, we are only ranked 83rd out of 142 countries in terms of the burden of government regulation on business.

Recognising the impact of regulation upon business growth, from 2010 the Government announced a range of deregulatory measures designed to ease the burden on UK businesses and in particular SMEs. These measures included One-in One-Out provisions (where to bring in new legislation that will impose a direct cost on businesses, the Government has to remove or modify an existing regulation of an equivalent cost), sun-setting clauses for new regulations (the regulation automatically expires after seven years, unless it is renewed) and a micro-business moratorium (a three-year freeze on new domestic regulation for businesses with fewer than 10 employees). But can Government ever move fast enough in this area for businesses? Can it deliver significant deregulatory measures that reduce the burden on businesses and how can it deregulate effectively when much of the regulatory agenda is driven by Europe?

The answers to these questions can only emerge over time but there are indications of some light at the end of the tunnel.

Earlier this year IFF conducted a survey of over 2,000 senior business decision makers on behalf of the National Audit Office, in collaboration with the Local Better Regulation Office and the Better Regulation Executive to determine businesses’ views on the extent of the burden of regulation, both in general and in specific regulatory areas, and how that burden might be reduced.

The survey found that fewer businesses felt that the overall level of regulation in the UK was an obstacle to their business success when compared to three years ago, but still half of all businesses – particularly SMEs – reported that there is too much regulation. There is also evidence to suggest that year on year fewer businesses are finding some aspects of regulation and compliance burdensome.

Nevertheless there is still work to be done in demonstrating to businesses that government understands their needs and is able to consult meaningfully with business on regulation and enforcement more widely.

A copy of IFF’s report is available to download.