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Forum of Private Business

Red tape costs the service sector 8.4 billion, the only sector to see a reduction in real terms from 2013

16 July 2015 16:30

UNDER EMBARGO UNTIL 16 July 2015 16:30

Compliance now costs the nation’s service sector around £14,700 or over £1,750 per employee

• Red tape costs the service sector £8.4 billion or £1,775 per job
• Internal compliance costs have increased slightly to £4.1 billion, a reduction in real terms of 5%
• Consultants account for £2.3 million, a reduction on 2013
• In some sectors, such as the care sector there has been increases in the cost of compliance internally and externally
• Despite this, Forum members spend around half as much on external consultants than non-members firms.
• Members also spend 15% less time on employment law

Red tape now costs the UK service sector with 1 to 250 employees around £8.4 billion or 42% of the total cost of compliance for the UK’s micro, small and medium sized employers. This means that compliance with legislation now costs firms in this industry £14,700 or around £1,775 per employee – according to research from the Forum of Private Business.

Internal compliance costs have risen to £4.1 billion, eclipsing the modest savings on external consultants which has dropped to £2.3 billion with the majority of this cost being spent on tax compliance specialists.

Time has now become the most pressing issue for the industry even though the cost of compliance dropped by 5% over the last 2 years, in line with increased business opportunities.

“Some of those in the service sector has benefitted from improvements in technology and the formal classification of most office space as being low risk, there are however exceptions as service sector businesses which are highly regulated such as the care, education and increasingly the financial services sector all showing significant increases” said the Forum’s Managing Director, Ian Cass.

“As a result 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.

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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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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Leanda Hickman

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Tel: 01565 626023


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