Small firms have little confidence in Government advice

Small businesses choose not to use guidance from Government or have so little confidence in it that they prefer to pay for advice, according to a Government-funded review of small firms.

It also claimed that small firms want to comply with the law and it is up to the Government to give them a cost effective and efficient way for them to do so. The independent review, undertaken by entrepreneur and former small business counsellor, Sarah Anderson, has recommended a range of innovative solutions to improve the quality of guidance government gives to business.

Sarah Anderson said: "Many small businesses do not use and have little confidence in guidance from Government. Where there is good guidance, they don't know where to go. Instead they choose to pay for advice, which they could get free or which might make them do more work than is necessary, to comply with the law.

"Improving the quality of, and access to, government advice is vital if we want to see better understanding of, and compliance with, the law.

"The vast majority of small businesses want to comply with the law. Government should give them a cost effective and efficient way for them to do so."

Recommendations

This is the second shake-up of the Government's small business advice in recent years. Just over two years ago the Government said it would 'streamline' its Small Business Service after much criticism as to its cost and lack of focus. At the time, the Government ran more than 3,000 different schemes to support small business and those proposals planned to reduce this to 100 by 2010.

Under the latest recommendations in the Anderson Review, small businesses will now get a one stop shop for guidance on health and safety and employment legislation, that will help make sure they comply with the law and save them time and money.

The recommendations are designed to increase compliance with the law, boost business confidence in Government advice and cut costs for small businesses. They include:

• a telephone advice service, free to SMEs for the first year, providing tailored and "insured advice" to make sure they comply with employment and health and safety law;
  
• Government taking responsibility for its guidance, removing disclaimers and encouraging discretion over prosecution of "reasonable" businesses; and
  
• creating a single access point for all government guidance.

Almost half of all businesses use external advice about how to follow regulation, spending at least £1.4 billion per year on such services. Some 75 per cent of medium sized enterprises report having paid for advice on employment or health and safety regulation. SMEs are disproportionately represented in employment tribunal applications, for example, with businesses with 50-249 employees generating 21 per cent of tribunal applications but only accounting for four per cent of total employment.

In order to redress this imbalance the review focused on improving three areas: providing certainty over outcome; making guidance more accessible; and improving the clarity of guidance for businesses.

Other proposals included a 'quick start' summary for each piece of guidance, setting out essential actions firms must follow to comply with the law. It recommended providing a range of channels through which businesses could access guidance, whether electronically, through printed material or face to face contact.

In order to improve the consistency of advice the review suggested a central contact point for reporting inconsistent or inaccurate guidance, with an obligation on government to respond and resolve the issues.

Background

In March 2008, as part of the launch of the Enterprise Strategy, the Government asked Sarah Anderson to 'make recommendations on ways of ensuring firms can place greater reliance on official guidance and thereby reduce the cost of compliance.'

The research highlighted that businesses had the most difficulty understanding health and safety and employment legislation. Firms clearly indicated that they felt Government guidance does not provide certainty over whether following it means complying with the law, that they did not understand all of the content and did not know where to find relevant information to help them comply with the law.

Small businesses face a greater burden, in terms of costs and time spent per employee, complying with regulation. Almost half of all businesses use external advice about how to follow regulation, spending at least £1.4 billion per year on such services.