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Forum of Private Business

Increasing red tape leaves small firms in Scotland with a £1.5 billion bill for annual compliance costs

23 July 2015 11:00

UNDER EMBARGO UNTIL 23 July 2015 11:00

Although there is uncertainty about the economic recovery, there is no doubt that the administrative costs on the region’s small firms is increasing.

• Red tape costs business in the country £1.5 billion or £1,810 per job
• Internal compliance costs have risen to £1.05 billion
• Consultants account for £474 million, a reduction on 2013
• Forum members spend slightly less time on compliance but 50% less on external consultants than other firms.

Red tape now costs businesses in Scotland £1.5 billion. This means that compliance with legislation now costs small firms £14,900 each or around £1,770 per employee – according to research from the Forum of Private Business.

Internal compliance costs have risen to £992 million, eclipsing the modest savings on external consultants which has dropped to £0.5 billion.

On average, each firm in the region hands over approximately £4,800 per year to companies offering legal guidance, including advice on employment law, health and safety and tax – around a third of their £14,800 annual compliance bill, which includes internal time costs.

The not-for-profit Forum’s research shows that the combined annual amount paid by the Scotland’s small firms to consultants for tax advice is in excess of £278 million, external health and safety support costs almost £55 million per year and employment law consultancy services come to £27 million.

“Scottish SMEs continue to struggle to control costs – particularly in the current economic climate – and remain frustrated by the amount of red tape they have to negotiate every day,” said the Forum’s Scotland consultant, Ian Ashworth.

“Unlike large companies, small firms simply do not have internal departmental resources dedicated to complying with regulations, so it is either the business owner or a key senior manager who is forced to devote a large amount of time to this task – an average of almost 37 hours each month – or pay for an external consultant, which can be extremely expensive.

Small firms who are Forum members spend slightly less time on compliance than other businesses of their size and around half that of other business on consultants’ fees thanks to our support, however our members in Scotland are increasingly concerned about the lack of straight answers from HMRC and other enforcement agencies.”

The Forum has found that small firms across the UK pay external contractors a total of £6.5 billion for regulatory compliance services, while internal time costs are £13.5 billion in total.

“There is also evidence that the government is failing to consider the implications of regulations on Scotland’s smallest and most numerous employers as micro businesses are paying almost ten times more per employee than medium-sized firms,” continued Mr Ashworth.

“Paying commission on holiday pay has been a bolt out of the blue and businesses with fewer than five people say that they simply cannot get shared parental leave to work without it harming their ability to grow.”

“It is vital that companies ensure they have the correct internal processes in place to avoid the hefty fines and damaging consequences of non-compliance but we should be moving towards businesses being able to manage risk rather than spend significant resources on avoiding it.”

In addition to its legal expenses insurance, the Forum continues to help small businesses negotiate employment law pitfalls via its Employment Guide. The new and updated 2016 guide is to be published in October.

The Forum has also bolstered its support for members in light of concerns about tax investigation.

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Notes to editors

Representing thousands of small businesses across the UK – including retail, service providers and manufacturing companies – the Forum is recognised by the Government as one of the six main business support and lobby groups. It uses this position to influence decision-makers in the UK and Brussels on the issues that matter to small businesses.

Media contacts for this press release

Thomas Parry
Research Manager
Tel: 07885 888085
ISDN: 01565 654673

Scotland Contact

Ian Ashworth
Scotland Business Consultant
Tel: 01524 272 300

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Press Contacts

Leanda Hickman

Marketing Manager

Tel: 01565 626023


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