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Red Tape Number One Problem For Small Businesses… Again
(26 January 2004)

Excessive Government regulations and paperwork has moved back to the top of the list of key concerns for small businesses, according to the latest NatWest Quarterly Survey of Small Businesses in Britain. The report found that 18% of small firms now see red tape as the biggest problem facing their business, a jump of 8% over the last six months.

The burden of red tape has now dislodged fears over the economic climate from the top of the table, where it had been for the past year. Government regulations are now the biggest issue by a significant margin for those firms with five or more employees.

Over 50% of those respondents with 10 or more employees state that red tape is their biggest problem. The second most important problem facing their business, that of a lack of skilled employees, trails 20% behind this. Interestingly, no respondents of this size felt that interest rates or access to finance were a problem for them.

More encouragingly however, small firms report that they are no longer as worried about the economy as they have been, with only 13% stating it as their biggest problem, a fall of 8% in the last six months. However, the economy remains the largest problem for firms with fewer than four employees.

Individual sectors have identified specific concerns: for example, 14% of firms in the health and leisure and personal services industry state lack of demand. Taxation, however, is now the top ranked problem for small firms operating in the hotel and restaurant sector, with 21% of companies in the sector reporting it as their biggest single problem. A lack of suitably skilled employees, not enough time in the day, and the burden of tax also weigh heavily on the minds of small firms.

The survey also shows that the performance of Britain's small firms has weakened a little this quarter with more small businesses reporting a fall in the number of people they employ and fewer firms investing money. Businesses operating in London report the weakest performance with more small firms experiencing a fall in turnover, employment and investment. By contrast, North East companies, who were the least positive in the previous survey, now report the highest balance, seeing an increase in sales and selling prices.

Jeremy Peat, Chief Economist at NatWest, said: "This survey provides pause for thought at a time when recent economic news has tended to be distinctly positive. Small firms have continued to find regulation and paperwork a sizeable burden in recent months, against a background of a slight deterioration in their economic performance."

Other problems highlighted by the survey are shown below:

  • Exchange rates - 0%
  • Interest rates - 1%
  • Inflation - 1%
  • Other costs - 1%
  • No problems - 3%
  • Marketing problems - 3%
  • Cashflow/Payments/Debtors - 7%
  • Competition - 8%
  • Total tax burden - 8%
  • Lack of time/capacity - 8%
  • Lack of skilled employees/high pay - 8%
  • Sector specific demand/problems - 9%
  • General Economic Climate - 13%
  • Government regulations and paperwork - 18%

Notes to editors:

  • This survey was carried out between 14 November 2003 and 1 December 2003 amongst 700 small businesses.

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