UK Business Barometer

Wednesday, March 17th, 2004

The February survey was an exceptional one in that it was longer than normal, consisting of 22 questions instead of the usual 12. Ahead of the 2004 Budget, it focused strongly on aspects of business connected with the impact of regulation on growth, innovation and productivity. Respondents were asked what their top three practical choices were for government to reduce the impact of regulation on their businesses.

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About the respondents

155 respondents were drawn with the following population characteristics:

Sector
Production & Manufacturing	Distribution	Services	Total
28.4%	7.1%	64.5%	100.0%

Turnover (£)
< 1 M	1M-3M	>3M	Total
69.1%	17.4%	13.5%	100.0%

Number of Full-time Employees
1-10	11-20	21-50	51-100	100+	Grand Total
57.4%	29.7%	5.8%	2.6%	4.5%	100.0%

The first main area of enquiry was around the problems created for businesses in complying with taxation assessment processes and with employment and Health and Safety regulations. The respondents to the parallel survey, the UK Business Advisers Barometer (UKBAB) were asked to what extent their clients experienced problems in the areas referred to in each question. The two sets of results are presented together and show broad reinforcement with each other.
PAYE and its associated functions is seen by many from both Businesses and Advisers as a problematic area, with 37% of UKBB and 48% of UKBAB responding in the Highest categories (4 and 5). UKBAB respondents were the more pessimistic in their responses overall to this question.
Businesses were more confident about processing VAT returns, with 41% finding this unproblematic or moderately unproblematic, and 21% saying that VAT processing is highly problematic or moderately highly problematic. Advisers were more reserved, with 24% saying that they thought their clients found this unproblematic or moderately unproblematic, but 41% saying that clients found this moderately problematic or highly problematic.
When it comes to income tax self-assessment, both Businesses and Advisers are less happy overall. 46% of Businesses and 67% of Advisers, on behalf of their clients, think that this area is either highly or moderately highly problematic.

Other taxes present less overall problems to UKBB respondents, with 32% finding them unproblematic or only moderately problematic although 32% still see them as highly or moderately highly problematic.

It is perhaps not altogether surprising that out of this group of six areas, employment regulations appear to cause the greatest levels of anxiety. 60% of UKBB respondents feel that dealing with employment regulations is highly problematic or moderately highly problematic, while 82% of UKBAB respondents judge that they cause a similar level of problems for their clients.
The last of this group focused on Health and Safety regulations. Again, both UKBB and UKBAB respondents provided most responses in the highest categories (4 and 5), the UKBB with 51% and the UKBAB with 55%.

The next group of seven questions looked at the impact of compliance on business innovation and growth. The first aspect was that of time taken up by compliance with regulations. Both UKBB and UKBAB respondents took similar views with 62% of UKBB and 68% of UKBAB saying that compliance takes up too much time to a high or moderately high extent.

In terms of developing new markets, the response was still high but not so extreme. 39% of UKBB respondents are highly or moderately deterred from developing new markets because of compliance, while 32% of Advisers think that their clients are deterred to that extent.

Developing new products, services or processes is affected to a somewhat lesser degree by the need to comply with regulations, with 36% of Business respondents and 26% of Adviser respondents feeling that that they, or their clients, were deterred to a high or moderately high extent. 33% of UKBB and 31% of UKBAB respondents reported that they were only slightly deterred, or not at all deterred.

When it comes to diversion of activity from other business areas because of compliance, there was a stronger reaction than to the two preceding questions. 54% of UKBB and 51% of UKBAB believe that complying with regulations does divert them, or their clients, from other business activities , to a high or moderately high extent.

The next two questions looked at staffing impacts. 50% of Businesses and 54% of Advisers find that they, or their clients, are highly or moderately highly deterred by regulations from recruiting more staff, while 23% of Businesses and 19% of Advisers, on behalf of their clients, say that regulation causes very little or no deterrence to recruitment of additional staff.

More respondents to the UKBB believe that regulation compliance costs them too much money in terms of buying in advice or extra staff, with 53% finding this to a high or moderately high extent. UKBAB respondents are not so strong on this, with 51% responding in the high or moderately high categories.

The impact on turnover from compliance with regulation produced a more even spread of responses from UKBB respondents, with 28% saying that turnover was highly or moderately highly hit, 30% taking a mid-position and 37% saying that it is only slightly or not at all affected. 21% of UKBAB respondents feel that turnover was highly or moderately highly inhibited, 30% were in the halfway category and 38% said that it is only slightly or not at all affected.

In seeking to discover what businesses and their advisers consider to be the most important ways of reducing the impact of regulation on business performance, respondents were asked to select their first second and third most preferred choices consecutively. What emerged was a small number of focused choices echoed by both groups of respondents.

These leading choices were:
improve governments understanding of the concerns of business
reduce the number of regulations
make regulations less complicated
provide more help and information to help businesses comply with regulation

The most preferred option for UKBB respondents was to improve governments understanding of the concerns of business. This gained the support of 26% of respondents. 28% of the UKBAB respondents voted for reducing the number of regulations as their first choice.

Runners up for first choice were:

UKBB - reduce the number of regulations (25%)

UKBAB - make regulations less complicated (24%)

The second most preferred choice emerged as 'make regulations less complicated' for both UKBB respondents, with 25%, and for UKBAB respondents, with 26%, the remaining choices from both surveys being well behind in response terms.

The third most preferred choice was again 'make regulations less complicated' for UKBB respondents, with 23%. For UKBAB respondents, two options tied for the third choice namely, 'make regulations less complicated' and 'improve governments understanding of the concerns of business, both attracting 16% responses.

Visits by HM Inspectors from different Departments have the potential to be beneficial to businesses, as well as being potentially stressful. However, the number of respondents to the UKBB that have actually experienced such visits is relatively small, with 54% of respondents not having had any kind of inspection visit in the last 12 months.. Some respondents received visits from more than one Department, and the percentages shown in the diagram below are based on the total number of visits rather than the total number of respondents.

Among those who received visits by the Health and Safety Executive, only the minority found the visit very helpful or helpful.

A similar experience was had by those visited by the Inland Revenue, but even less found it a helpful occasion.

Of those visited by HM Customs and Excise, 5% found it helpful or very helpful:

Visits by Environmental Health returned the same percentage, 5% finding the visit helpful or very helpful.

The final part of the survey looked at the impact of the new pension regulations on businesses' investment plans. Responses from both surveys were similar in that 22% of UKBB and 23% of UKBAB respondents believe that the costs of the new regulations is highly or moderately highly inhibiting investment plans for their own businesses or those of their clients. 42% of UKBB and 32% of UKBAB respondents think that the cost is having little or no impact on investment plans.

Listed below are extracts from feedback received in Survey BB69 February 2004.

Comments are listed under sector headings.

Views expressed are those of individual panellists and may not represent those of the University.

Production & Manufacturing
As a medical company regulations are an integral part of what we do. Common standards across Europe have reduced our regulatory costs and significantly improved our ability to access these markets. There is a lot of emphasis in the news about 'more red tape', which I have never quite understood. As businesses we have always had to complete IR and VAT returns - how has this changed? Having sensible Health & Safety and Employment procedures is just good practice and prevents costly problems occurring. What are these people moaning about?
Batten the hatches down boys the slide starts soon. If you thought cheap eastern Europe was a problem before, wait until May 1st.
In addition to the number and complexity of regulations the cost of proof of compliance in pounds and man hours should be addressed
This was an inspired topic to choose, red tape is choking the ability of UK businesses to get on and earn profit to secure their future. The "Nannny State" and political correctness have gone mad. Taxation levels are punitive if you look at the combination of direct and indirect taxation and indigenous businesses get no Govt assistance whatsoever. Our Group has grown from 100 to 400 employees on 8sites across the UK and Govt assistance amounted to £250k out of an investment programme of circa £15m, need I say more !!

Business Services
In the near future, Western economies will start to depend more on SME's to provide stability. If Britain wishes to increase the number and breadth of successful startups, it must get it's act together reducing red tape and effectively providing support to would be entrepreneurs, -especially making it easier to gain access to finance.
It is the tax forms that hamper me most of all. I have two very small companies, two people in each. I spend a totally disproportional amount of time on making returns and reports when I could be investing that time in building the businesses. Until built, I cannot afford to employ people to take care of these functions for me. I am thinking of closing one of the businesses down, halving my admin time, and concentrating on the other. I don't have too much of a problem with my books because not a lot goes through them yet, but I do have problems with making all my VAT, income and company returns.
It would be helpful for small businesses to be given free seminars on Pension changes, in simple language with simple choices. Not all small business owners fully understand their options or the red tape that goes with it. Not every business owner has the extra cash required to save for a private pension, and if there are any government incentives or schemes which will help with the pension funds it would be well received.
As a two-man business working from home, few of the questions about regulation were very relevant. However, from my previous experience of running a company, the answers would be very different if we expanded, even just a little, and started employing people.
Any attempt to reduce the burden of regulations introduced by non-elected bodies (EU?) is to be welcomed.

Other
We find it burdensome to comply with overseas regulations when entering new export markets.
All the items cost us a great deal of money as they have to be dealt with by others; accountants, solicitors etc. Less regulations = less cost
In simplified terms, the role of regulations is to constrain activity. The role of government should be to enable, not constrain. It is impossible to regulate for every thing that happens and may happen in the future but this appears to be what the government and Brussels want to do. Taken to its logical conclusion, more regulations will make it impossible to do anything and we are not far from that point now.