Reels of red tape for startups... but it's all relative

Following Prime Minister David Cameron’s vow to 're-open Britain for business', the coalition has pledged to cut red tape, which is frequently cited by small business owners as the biggest barrier to hiring staff.

Cable says: “The deluge of new regulations has been choking off enterprise for too long.
"We must move away from the view that the only way to solve problems is to regulate."
According to Cable, reducing the level of business regulation while safeguarding protections for consumers and the environment would be “a real challenge and it will not be easy”, adding that it will require increased social responsibility on the parts of businesses and individuals.

The coalition’s ‘action plan’ for cutting red tape includes the creation of a new Cabinet ‘star chamber’ (the Reducing Regulation Committee), chaired by Cable, which will lead the efforts to reduce red tape; and an immediate review of all pending legislation inherited from the Labour administration, which the new government says will cost £19.1 billion a year to implement after April 2011.

A new ‘challenge group’, with a mandate to find ways of achieving social and environmental goals without legislating, will also be established, along with a ‘one-in, one out’ approach to new laws to control the red tape burden and ensure any new regulatory cost is compensated by cuts to the cost of old laws.

Cable says: “We need to reduce regulation and at the same time meet our social and environmental ambitions. This demands a radical change in culture away from the tick box approach to regulation only as a last resort. It’s a big task but one worth striving for.”

The moves have been applauded by small business lobby groups and their members. Phil Orford, Chief Executive of the Forum of Private Business (FPB), says: “Our calls for a comprehensive review of red tape finally appear to have been heard.
"The first job of the new ‘star chamber’ will be to scrutinise all new regulations that are in the pipeline and that has to be welcomed.”

A recent survey by the FPB found that regulatory compliance costs small businesses £9.3 billion a year, with the average employer spending 37 hours a month on paperwork and other requirements.

However not all business groups have seen this as a must-do. For instance, the Federation of Small Businesses (FSB) has disputed recent claims from former Dragons' Den investor Doug Richard that it is difficult to start a business in the UK, saying red tape is only a burden for established firms.

In Doug’s Entrepreneurs Manifesto released earlier in the year - months before the change in government - the former Dragon and founder of the School for Startups said that excessive red tape was deterring people from starting in business and that the Government's Simplification programme was failing.

"People should be able to start a business in an afternoon," he said. "According to the Global Economic Monitor, which measures economic freedom and the ability of countries to support small business – including the number of days it takes to start a business – Britain is halfway down the league table."

However, the FSB's head of public affairs, Stephen Alambritis, said that the government has reduced the barriers to setting up a business. "They have simplified the obstacles people face setting up a business, but if you want to grow the business – for example, by moving from self-employed to employer status – then it can be more difficult."

Alambritis also agreed with a government statement that people can set up a business in the UK in less than a day. "We have one of the easiest regimes in the world for setting up a business, but it is the ongoing regulations that are a burden," he said.

A Department for Business, Innovation and Skills (BIS) spokesman said that research from the European Commission found that it takes, on average, less than a day and costs only £20 to register a company in the UK, compared to a European average of £382.

Personally, I would have to agree with the BIS and FSB’s opinion. Having recently looked at opening an office in Germany we would have to concur that the UK has less legislation and barriers for starting a new business. Although this story covers both sides it is good to see that the coalition government has taken the Conservative’s stance on allowing businesses new or old to flourish by taking away any barriers that may be stopping this from happening.