Are small businesses really crying out for de-regulation?
How often do we hear that regulations are driving businesses into extinction? Especially the small ones? Last month, the British Chambers of Commerce made:
Immediate and real action on existing pledges to reduce regulation
the number one item in their 5-point “Plan A” to boost business growth. Earlier this year, the Federation of Small Businesses complained that:
Despite the rhetoric, the burden of regulation continues to get heavier
Back in February, the CBI’s Budget Submission argued that companies “expecially SMEs” are discouraged from hiring by employment regulations. This made the latest edition of the BIS SME Business Barometer, published today, all the more interesting. Based on 500 interviews with owners and managers of SMEs, it gives us the opportunity to find out just how much small businesses are being held back by over-regulation.
Although the organisations that claim to speak for SMEs insist on the importance of this issue, it looks as though the economic stagnation I blogged about earlier today is much more significant. 27% of SMEs – more than one in four – are reducing or delaying their long-term investment plans because of “recent economic conditions”, compared with 5% increasing them or bringing them forward. (In construction, 39% are reducing or delaying their plans.)
But even more damning are the results of the query about the main obstacles to the success of the business. ‘The state of the economy’ was the main obstacle to success for 45% of SME employers in the latest barometer –
a higher proportion than that seen in any other Barometer.
So perhaps regulations were the next most invidious problem?
Obtaining finance was the second most frequently mentioned main obstacle (in a five percentage point raise since February 2011, it was mentioned by 12% of SME employers). The next most frequently mentioned obstacles were taxation, cashflow, competition and regulations.
Just 6% listed regulations as their main obstacle.
There is a lesson here for government, as well as business organisations. The key problem facing businesses – of all sizes – is the lack of demand. Everything else is just mood music.