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Tied up in red tape? FSB survey finds most small companies are

26 May 2016

Red tape is costing SMEs more than £14,000 a year.

The directors of smaller firms (SMEs) spend more time battling red tape than they do satisfying customers and creating new business. That is one of the findings of a survey by the Federation of Small Business.

More than half of smaller business owners (55%) say their company’s growth is being held back by the amount of time they have to dedicate to business administration, according to the new research.

The findings show that a small business owner spends more than 33 hours a month on internal business administration satisfying government legislation, including health & safety requirements – that represents almost a quarter of an individual’s working hours. In addition, the average small business sees around 70 hours of employee time tied up in business admin.

Two-thirds of smaller businesses (67%) say the administrative burden is preventing them from focusing on the primary purpose of their business. The study reveals that three-quarters of business owners (76%) spend more time than they would like on business compliance, tackling tax, employment law issues and insurance, dealing with workplace pensions, accounting tasks or health & safety issues.

Dave Stallon, Commercial Director at FSB, says: “The Government has pledged to remove £10billion-worth of red tape over the course of this Parliament. FSB welcomes this focus on de-regulation, which should free up small business owners to spend more time doing business and creating economic growth.

“Initiatives like The Red Tape challenge, the ‘one-in-two-out’ approach to new regulations, and steps to boost the regulatory Policy Committee are all moves in the right direction.”

Business administration is not just a burden on time, it can also have major cost implications. FSB members spend an average of £3,600 on help and advice with tax compliance, the survey found. Small business owners’ time and money will be stretched even further by Government plans around tax reporting, announced in the 2015 Autumn Statement. This will require small businesses and the self-employed to keep digital tax records and report electronically every quarter.

Owners say they could use the time spent on business administration more productively, with 61% claiming they would spend more time on sales or sales development. Indeed, the average smaller business owner claims to spend just 8 hours 50 minutes a month on new business development, just a quarter of the time they spend on business administration.

Dave Stallon: “It's a common frustration among owners of smaller companies that they are unable to find the time to work on their real business activities because they are too busy completing administrative tasks, however essential they are.

Nearly half of respondents to the survey (46%) said they would hire external advisors to help them with these tasks if they could afford to. The average spend by smaller business that do outsource these services is almost £14,000 a year.

 

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