New figures have shown that smaller businesses in the
construction sector lose more than £1.1bn every year due to government red
tape. Research carried out by business lobby and support group the Forum of
Private Business (FPB) has found that Britain’s small and medium-sized
construction firms spend £1,157m each year complying with legislation.
The figure, drawn up using feedback from members of the
not-for-profit FPB, is based on the amount of company time, and therefore
money, spent on government-imposed bureaucracy. It was revealed by the FPB’s
quarterly Referendum survey of members.
This latest issue of Referendum, which focused on ‘the cost
of compliance’, found that recession-hit construction companies are forced to
spend an average of 37 hours of company time each month on form-filling and
paperwork. Those with nine or fewer employees spend an average of 34 hours on
it, while those with between 10 and 50 employees spend around 28 hours and firms
with up to 249 workers devote approximately 131 hours.
In terms of costs, complying with health and safety
legislation alone leaves smaller construction firms £277m out of pocket each
year. The cost of complying with employment legislation was put at £283m per
year, comprised of dismissals and redundancy (£41m), absence control and
management (£44m), maternity (£18m), and disciplinary issues at £27m.
Meanwhile, the costs associated with legislation on employee holidays and any
other remaining matters were put at £154m.
The legislation surrounding waste and the environment was
calculated to cost £104 million, equality and diversity £25m, ISO and industry
standards £111m, tax £219m, and building and property £139m.
Construction firms in the north-west face the biggest bill
for overall compliance out of 12 regions identified by the Referendum survey,
at £175m. The sector’s companies in the South East are hit with the second
largest bill, at £163m, followed by Eastern England (£118m), the South West
(£110m), the West Midlands (£108m), and Yorkshire and Humberside (£91m). The
cost for both the East Midlands and London was calculated at £85m, followed by
£81m for Scotland, £53m for Wales, £51m for Northern Ireland and £37m for the
north-east.
Cardiff-based FPB member Terry Scarfe, who runs specialist
metal structure manufacturers Amrob Engineering Limited, said filling out
paperwork tied in with government rules and regulations was a huge burden on
his firm.
He said: “It costs us a fortune just to comply and it’s not
improving anything – it’s just part of this blame culture. As long as you
sign a piece of paper to say it’s not your fault, it’s fine.”
Mr Scarfe also warned that the regulations were creating
more rogue construction companies which ignore the rules and can afford to
undercut responsible firms.
He said: “The more legislation comes in and the more
paperwork you have to do, the more people go underground.
“We apply the health and safety regulations to everything we
do, but there are so many people out there who don’t and don’t have insurance.
We’re complying with all the necessary regulations, so our prices are higher
and we don’t get the job.”
Commenting on the figures, the FPB’s chief executive Phil
Orford said: “As many people will be aware, the UK’s construction industry has
been particularly badly affected by the recession.
“With small building firms facing a drastic shortage of work
across the country, I’m sure the £1.1 billion cost of compliance revealed
through our Referendum survey will add to the sense of dismay felt by many of
the industry’s business owners.
“The FPB is urgently campaigning for the Government to cut
down on the regulatory burden placed on small businesses, both in this sector
and elsewhere, to free up owners and enable them to spend vital time and
resources on pulling through the current trading conditions.”
Out of four sector headings in the research, based on the UK
SIC, the overall cost of compliance for smaller businesses in the construction
industry was the third highest. The price was put at £1,157m for construction,
£2,764m for TRAD businesses and £4,151m for the services sector.
The survey found that, taking external costs into account,
regulation costs the UK’s smaller business employers almost £12bn per year. The
FPB is now urging the Government to cut down on red tape for small businesses
and believes that reducing the time and cost of complying with legislation must
not be sidelined, particularly as many firms are struggling to survive because
of the recession.
