Regulation threatens business growth but change is on the way
15 July 2010
Business growth is still threatened by the burden of regulation but there are signs that the drive to cut red tape is having a positive impact, according to a national survey undertaken for LBRO, the technical expert on better local regulation.
Around half of businesses don't think that local authorities understand their sector well enough to regulate them, according to the Business Perceptions Survey 2010 of 2,000 businesses.
And more than half of businesses feel the overall level of regulation in the UK is an obstacle to their success; with one in six businesses rating complying with regulation as their single greatest challenge.
However, the jointly commissioned study by LBRO and the National Audit Office (NAO), found business believe the purpose of locally enforced regulation is clear; and what is expected of them in order to comply is straightforward to understand. Respondents agreed that most regulation is fair and proportionate. The survey also shows evidence of a growing partnership approach between business and local authorities
However, the cost of complying with regulation is significant, with a quarter of businesses employing at least one person to deal with a specific area of locally enforced regulation.
Clive Davenport, Policy Chairman, Trade and Industry at the Federation of Small Businesses, said: "Small businesses create a huge proportion of the country's wealth yet are most vulnerable to inconsistency in regulation. Firms with few employees face considerable pressure on their time and resources, and are in no position to deal with overly complex administration. Red tape is like an additional tax."
Inconsistency of enforcement adds to the cost of regulation for business. The survey showed thirty-eight per cent of businesses are not confident that local councils would take a consistent approach to enforcement.
Thirty-one per cent of businesses think that different local councils do not take a joined-up approach to regulation. Large businesses are less confident than other businesses that local councils are consistent and less likely to think that different local councils take a joined-up approach to regulation.
Chairman Clive Grace said: "Locally enforced regulation such as food safety, consumer protection, fire safety, health and safety is essential but it can have a significant impact on business growth. The way local regulation is enforced is just as important as the rules, and there serious concerns about the cost to business of dealing with it. However, there are positive signs from this research and other studies. There is evidence of a growing partnership between business and local authorities, which is good news and shows that the commitment to better local regulation is beginning to pay off.
"We must encourage wealth creating business and greater efficiency in how public resources are used. There are issues around local authorities' understanding of business and inconsistency in enforcement and advice, which we are addressing through our programmes such as Primary Authority* and Trading Places*."
Evidence for the growing sense of partnership is seen in the majority (82 per cent) of survey respondents who considered the role of local council regulators as both to enforce the law and to provide advice. This is an increase on the 2008 LBRO/Mori survey which found 75 per cent of business felt that providing an advisory service was important.
The biggest burdens for business were keeping up to date with new legislation and changes to existing legislation. Clive Grace said: "Given that the current system of local regulation has evolved over nearly 200 years and has become very complex, it is hardly surprising that it is taking a long term commitment to change it to suit the needs of a competitive 21st century economy. This is a critical time for the UK and we must push further and harder."
For LBRO's report, follow this link: www.lbro.org.uk/publications-home.html