UK small businesses drown in £36bn red tape as reforms fall short
Small businesses in the UK face growing challenges from red tape, with costs and lost time adding up. A new report highlights that only a small fraction of owners find it easy to navigate regulations. Meanwhile, the government has pledged to cut the burden by a quarter within the next six years.
SMEs currently spend £36 billion a year on regulatory compliance, according to recent figures. This equates to 379 million lost hours—time that could be used for growth or day-to-day operations. While 41% of owners say guidance from regulators is clear, just 10% find it straightforward to resolve issues linked to bureaucracy.
The Federation of Small Businesses (FSB) warns that excessive regulation is stifling expansion. Their concerns are echoed by other business groups, who argue that the upcoming Employment Rights Act could add £1 billion in extra costs. Critics also point out that the regulatory policy committee lacks the authority to enforce cost assessments for new rules.
In response, the Labour government has set a target to reduce the regulatory load by 25% by 2030. Plans include scaling back the Financial Ombudsman Service's powers, easing planning restrictions, and introducing digital compliance reforms. However, FSB officials doubt the goal is achievable without addressing HMRC and Companies House requirements.
The government's push to cut red tape aims to free up resources for small firms. Yet questions remain over whether the measures will go far enough. With billions spent annually on compliance, businesses continue to call for more effective reforms.
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