Small business owners in Kirklees have been urged to shop around for more affordable business services – as the cost of complying with rules and regulations escalates.
Research by the not-for-profit Forum of Private Business shows that small firms in Yorkshire pay £525m a year to outside consultants for help to comply with regulations – more than a third of their £1.3bn annual “red tape” bill.
On average, each firm in the region hands over about £5,600 a year to companies offering legal guidance, including advice on employment law, health and safety and tax. That accounts for about 40% of their £14,300 annual compliance bill, which includes internal time costs.
The amount handed over to consultants has increased by about 16% from £4,900 in 2011.
The research shows that the combined annual amount paid by Yorkshire small firms to consultants for tax advice exceeds £301m while external health and safety support costs almost £109m a year and employment law consultancy services come to £58m.
The main annual internal costs are employment law at about £3,830 per employer; health and safety at £3,050 and tax compliance at £4,870 per employer.
Overall, 66% of employers have seen consultancy costs rise since 2011, when the previous “cost of compliance” research took place.
Forum chief executive Phil Orford said: “Small businesses in Yorkshire and Humberside continue to struggle to control costs – particularly in the current economic climate – and remain frustrated by the amount of red tape they have to negotiate every day.
“With just under a month to go before October’s common commencement date, there is no hiding from the fact that, despite government promises to reduce the time and money spent on red tape, compliance costs continues to hinder job creation and growth.
“Unlike large companies, small firms simply do not have internal departmental resources dedicated to complying with regulations, so it is either the business owner or a key senior manager who is forced to devote a large amount of time to this task – an average of almost 35.5 hours each month – or pay for an external consultant, which can be extremely expensive.”
The Forum said that small firms across the UK pay external contractors a total £18.2bn for regulatory compliance services, while internal time costs are £11.3bn in total.
It said there was also evidence that steep employment, health and safety, tax and other consultancy fees continue to be barriers to job creation as they increase as a business grows. In particular, taking on more staff leads to more employment law red tape – and greater compliance costs.
“The increasing cost of fines for non-compliance on everything from health and safety to unfair dismissal has made the ongoing support we provide to our members through our helpline and guides all the more important,” said Mr Orford.
“It is vital that companies ensure they have the correct internal processes in place to avoid the hefty fines and damaging consequences of non-compliance.”
