Red tape keeps small firms small

Jul 29 2005 by Brian Amble Print This Article

More evidence has emerged of the effect of red tape and taxation on small business as a new survey find that more than third of small firms in the UK want to stay small and not recruit any more employees.

The latest NatWest/SERTeam Quarterly Survey of Small Business has found that two thirds of small firms view red tape as the biggest impediment to growth, with taxation being blamed by more than half.

According to small businesses themselves, their reduction would lead to more small firms considering expanding at a faster rate.

Earlier this year, the UK Business Barometer survey found that a quarter of businesses have purposely avoided expansion to avoid the impact of regulation, with almost all saying that their decision was because of the impact of employment legislation.

Research by the CBI has also found that firms in every part of Britain see red tape as more of a dampener on growth than the availability of finance or inadequate government support.

Other measures intended to help small businesses got a big thumbs down from those who took part in the NatWest survey.

Fewer than one in three felt that the provision of loans and grants was helpful, while subsidised access to consultancy services and help with training were seen as useful by fewer than one in seven

Over a third of small businesses believe that success in finding new customers has the strongest influence on their desire to grow.

Half prefer to measure business growth by the number of sales that they generate, almost four out of 10 base it on profits and a mere two per cent measure it in terms of market share, employment, number of sites or product range.

Pete Ferns, Director of NatWest Business Banking, said: "Deciding to grow your business is a big decision and one that requires a lot of planning. Expansion will have a direct impact on cashflow and profit in the short term; it can however lead to extensive gains in the longer term.

"It is clear from the research that Government regulations and taxation continue to impact Britain's small business community and appear to be a key reason behind their attitude towards growth."