Small firms hit worst by Red Tape

One of the country's biggest banks has concluded that the burden of Red Tape falls disproportionately on the smallest businesses - in terms of the time they have to spend dealing with Government bureaucracy and the negative effect it has on them employing people.

The latest NatWest Quarterly Survey of Small Business in Britain shows that more than 50 per cent of small businesses admit to either reducing the number of people they employ or avoiding employing more people because of the concern over the increased burden of paperwork.

Where a business proprietor works on their own, they spend on average 8.9 hours per month dealing with government regulations and paperwork, according to the survey, whereas a firm with over 50 employees, staff and advisors spend an average 79.7 person hours per month on compliance. This indicates that the burden of red tape falls disproportionately on the smallest businesses, as they spend nearly eight times more per person dealing with paperwork.

Also revealing is that when firms make the decision to become employers, many of them choose to restrict or even reduce the numbers of staff they employ in order to avoid further regulation and paperwork.

Two thirds of small businesses also believe that there is too much regulation and paperwork related to employees and 84 per cent of businesses with 20 or more employees believe this to be the case.

VAT and employee taxation are the two areas of government regulation and paperwork that take businesses the most amount of time with over 60 per cent stating these as their biggest bugbear. Eight out of ten small businesses with no employees however feel that self-assessment is the most time consuming aspect of government regulation.

Construction firms spend the most time (35.5 hours) dealing with regulation compared with only 15.3 hours for those in the wholesale sector.

Peter Ibbetson, Head of NatWest Business Banking, said: "The burden of red tape and Government regulations is clearly still weighing on the minds of small business owners across the UK, especially with regard to employee paperwork. Although much of it is necessary, it is concerning to see that small firms are thinking twice about employing more staff, and have even reduced jobs, because of the amount of regulation involved and I would like to see more done to help small businesses deal with this burden."