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Forum of Private Business

Red tape adds £3.2 billion onto the cost of manufacturing in the UK as internal compliance costs rise by 23%.

16 July 2015 15:45

UNDER EMBARGO UNTIL 16 July 2015 15:45

Compliance now costs the nation’s manufacturers around £21,730 each with smaller firms paying proportionally more

• Red tape costs the nation’s SME manufacturers £3.2 billion per £1,900 per job.
• Internal compliance costs have jumped to £2.3 billion.
• Despite accounting for 12% of SME employers in the UK, manufacturers are responsible for 22% of internal compliance costs
• Consultants account for £0.9 million, a reduction on 2013, as manufacturers do more internally.
• Increases in compliance are predominantly coming from UK regulators making exporters less competitive globally.
• Despite this, manufacturers who are Forum members spend around half as much on external consultants than non-members firms.
• Members also spend 15% less time on employment law despite changes over holiday pay and evidence that small and medium firms are preparing for auto-enrolment.

Red tape now costs UK manufacturers around £3.2 billion or 16% of the total cost for the UK’s micro, small and medium sized employers despite accounting for 12% of firms. This means that compliance with legislation now costs firms in this industry £21,726 (compared to a UK average of £14,900) each or around £1,900 per employee – according to research from the Forum of Private Business.

Internal compliance costs have risen to £2.3 billion, eclipsing the modest savings on external consultants which has dropped to £0.9 billion, as manufacturers invest in internal specialists to help develop their businesses after the recession.

Time has now become the most pressing issue for the industry and it is not difficult to see why as the time spent internally meeting regulatory compliance rose to 48 hours per month, up a massive 23% on 2013 (UK average was 4%). Absence management and health and safety are the main time consuming elements for these businesses.

“Not all increases in compliance costs are a bad thing if businesses are looking to take greater control over their business and invest in knowledge that will lead to safety and productivity gains, but manufacturing is an international business and needless bureaucracy does contribute to the UK’s productivity gap” said the Forum’s Managing Director, Ian Cass.

“The Forum has raised our game and increased cover for our members in this industry removing the pernicious 51% prospect of success clause on our standard cover and including support for companies that have to act before they have time to take insured advice.

There have been mixed messages emanating from the government on health and safety in the last few years with the Loftstedt review supporting greater risk management and the Fee for Intervention underlining a risk averse culture in organisations. As a result we have updated our annual health and safety guide to help manufacturers to comply with the requirements of the HSE but not in a way that hampers productivity”.

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 are failing to consider the implications of regulations on the regions smallest and most numerous employers as micro businesses are paying almost ten times more per employee than medium sized firms,” continued Mr Cass

“Micro and small manufacturers are looking to disrupt traditional markets and to become the market leaders of tomorrow and we feel that compliance should enhance innovation not hamper it”

The Forum has also bolstered its support for members in light of concerns about tax investigation, cyber crime and the complexity of legal compliance. Overall Forum members pay around half as much for employment law and health and safety specialists as other firms, but spend a similar amount of time on health and safety compliance and 15% less on employment law.

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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 contact for this press release

Thomas Parry
Research Manager
Tel: 07885 888085

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Georgina Hodge

Campaign Communications Executive

Tel: 01565 626036


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