Red tape holding back millions of small businesses

More than half of small businesses in the UK feel that red tape and the burden of business administration is hampering their growth, according to a new study.

The research, by the Federation of Small Businesses (FSB), found that 55% of small business owners believe their business was being held back due to the amount of time they have to spend on administration.

Given that small businesses account for 99.3% of the 5.4 million private sector businesses in the UK, this means that almost three million small businesses could be negatively affected in terms of future growth.

Around 70% said that the administrative burden and red tape prevented them from focusing on their primary business purposes and goals. This, combined with the negative impact on growth, could have serious repercussions, particularly for businesses struggling with other issues. For many they could be contributory factors leading them to seek turnaround management, or which could even leave some facing potential insolvency.

Nearly half (45%) of the small businesses surveyed said they would be willing to bring in external advisors to help with some of these administrative tasks. Outsourcing is often expensive however. The average costs of outsourcing administration services comes in at around £14,000 per year, which could well be out of reach for many small businesses. FSB members spend an average of £3,600 on help with tax compliance alone.

Those that attend to their own administration spend an average of more than 33 hours per month on the various aspects. This is equivalent to more than a quarter of an individual’s total working hours.

The most time-consuming tasks are those involved with accounting, such as record-keeping and paying suppliers. This eats up an average of 14 hours and 45 minutes per month.

Other time-intensive tasks include business banking, which takes up nine hours and 19 minutes per month. Tax issues take up six hours and 38 minutes and HR issues take an average of five hours and 14 minutes. Health and safety compliance takes up an additional five hours and six minutes every month.

By Phil Smith

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