PracticeConsultingBusiness Finance – Red tape stranglehold on SMEs.

Business Finance - Red tape stranglehold on SMEs.

Government legislation and skills shortages are putting increased pressure on employers to the point where their viability is threatened. Damian Wild looks at the case for replacing red tape with positive incentives to help growth

A nationwide shortage of qualified staff, the ‘strangulating burden’ of red tape and a sharp rise in the volume of employment legislation is threatening the viability of many small businesses in the UK, according to a new survey.

The PKF SME Employers Survey, based on a poll of 300 small businesses throughout the UK and conducted in March, found that difficulties in dealing with issues as varied as compliance and regulation, remuneration and benefits and people management are hindering companies’ ability to grow their businesses.

Only one in four SMEs responding to the survey are aware of IR35 regulations – and half of those who are aware have taken no action. Most alarming of all is the situation in Scotland where fewer than one in ten small and medium-sized businesses are aware of the IR35 rules.

Other government legislation is also being largely ignored by many companies.

The survey also reveals widespread ignorance of the requirements of the new Human Rights Act, employers’ rights to access staff emails and changes to company car rules. And one in five SMEs questioned said they are not confident their business could stand up to Inland Revenue scrutiny.

At the same time as having to learn to cope with new rules and regulations, small businesses are also suffering staff problems. Almost half are having difficulties recruiting.

In East Anglia the figure rises to 60% though in Scotland it falls to nearer 30%. SMEs blame a low level of skills, qualifications and training among available candidates and low rates of unemployment for the shortage.

‘The results reveal a sector struggling to keep up with the constant flow of new regulations; finding it difficult to recruit good staff and poorly prepared to comply with the fundamental employer responsibilities such as PAYE, national insurance contributions and the new stakeholder pensions,’ said PKF chairman John Wosner.

‘The message to the government from our survey is clear. If SMEs are to have any chance of achieving their goal of building value in their business and continuing to provide employment for 90% of the UK workforce, the knots of red tape must be quickly snipped and replaced by stronger incentives and strategies to help rather than hinder the economic life force of this country.’

For more on the survey go to www.pkf.co.uk.

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