SMEs across the UK are being hit by increases in the annual compliance bill, according to new research published by the Forum of Private Business. The stats suggest that there has been a 4% rise in costs this year, compared to 2013, with compliance costs amounting to more than 19.2 billion.
Findings from the FPB’s study showed that 40% of small firms were mostly affected by the amount of time needed to meet the demands of regulatory changes, as oppose to the costs – although both factors are obviously inherently linked. Time lost was believed to have accounted for £38.85 billion of missed opportunities – an increase of around £1 billion since last year.
Taxation compliance was the biggest drain, followed by employment law and health and safety. Changes to pension law, notably the launch of the government’s auto-enrolment scheme, along with the rollout of the Real Time Information payroll process also placed further pressure on SMEs.
Keeping up with regulation changes is tough for smaller firms
Small businesses are being hit the hardest and are paying an average of £713 more per annum to keep on top of regulation changes. This above inflationary rise does nothing to help Britain’s SMEs flourish. For firms with less than nine members of staff, the compliance bill amounts to an equivalent of £164 per employee – around seven times the cost for companies with 50 or more workers.
Phil Orford, Chief Executive at the Forum of Private Business, said: “Our research shows little has changed in terms of what’s costing small business the most for compliance costs, with external costs continuing to be the main contributory factor.
“We believe this is largely down to the introduction of RTI, following the end of the small business extension, and firms having to pay a payroll specialist to manage their employees’ PAYE bills. In addition we have seen the increasing need to employ specialists to advise ahead of pensions auto-enrolment.”
Mr Orford believes the government underestimated the impact regulation changes would have on small businesses.
“It’s no wonder small firms are getting increasingly concerned about the cost of pensions auto-enrolment, which by its very nature is going to be hugely more expensive than RTI to set-up, deliver, and also maintain,” he added.