Business groups urge Government not to scrap red tape regulator

Small and medium-sized businesses across the UK are facing growing frustration over complex rules and administrative burden.

With businesses losing millions of hours and spending billions of points each year just to comply, many report that red tape is slowing growth and holding them back from growth and investment. 

As a result, the Government has pledged to ease the strain through launching a growth measures package, including increased investment and looking at ways to cut red tape that could prevent company growth. 

However, alleged plans to scrap the Regulatory Policy Committee (RPC) have been met with backlash from business groups and opposition figures, who say the independent watchdog is vital for ensuring new regulations are properly assessed and do not impose unnecessary costs on businesses.

Red tape is draining time and growth from SMEs

The number of rules, regulations, and administrative processes that need to be followed has long been a burden for small businesses across the country, slowing growth and diverting resources away from innovation and expansion.

According to research from the Federation of Small Businesses, SMEs are losing 379 million hours and spending £36bn a year dealing with red tape. 

For businesses with over 10 staff, the annual bill was £12,600 on average, while those with under nine employees and sole traders were paying £6,200 and £2,500 a year, respectively.

The quality of regulatory guidance was also criticised, with 40% of SMEs saying it’s “not easy” to resolve complaints and concerns, while 41% reported not getting a quick response when asking for help. 

Tina McKenzie, Policy and Advocacy Chair at the Federation of Small Businesses (FSB), said that rules were necessary for fair competition, but believes “the pendulum may have swung too far in the other direction”.

“Think of all the time and money that could be invested in new products or processes, or expansion, rather than being used up trying to work out how an obscure or confusing rule applies to a particular firm’s situation.”

Government pushes to cut back on business rules

With promises to review and streamline the regulatory system, the Government has announced a package of measures aimed at helping businesses grow in the UK.

Its sweeping package of growth measures aims to provide support to help businesses stay and grow in the UK, including larger investments through the British Business Bank and a review of red tape to simplify regulation and cut administrative costs. 

The UK’s Business Secretary, Peter Kyle, says the Government is committed to reducing the administrative costs of regulation by 25% by 2030.

“For too long, Britain’s most promising companies have had to look abroad for the backing they need to grow,” Kyle stated. “Scale-ups that should have become homegrown champions struggle against a system that is too slow and too fragmented.

“We are placing big bets on the industries where Britain can win, backing our innovators with real firepower, and cutting the red tape that holds them back.”

However, it has also been speculated that the Regulatory Policy Committee (RPC) – an independent watchdog that reviews new regulations – could be scrapped as part of the Government’s deregulation plans.

Business groups warn against scrapping regulatory watchdog

While the Government is pushing ahead with plans to reduce red tape and support business growth, some industry groups are raising concerns about the potential damage of abolishing the RPC.

In a joint letter to Kyle seen by CityAM, eight industry bodies – including UKHospitality, the Confederation of British Industry and the British Chambers of Commerce –  wrote that the Regulatory Policy Committee is a “vital component” of the UK legislative process, pointing to the valuable impact assessments it carries out on new regulations being considered.

Shadow Secretary of State for Business and Trade Andrew Griffith echoed these concerns, saying that “removing one of the few bodies which holds ministers to account for the cost of regulation would be deeply damaging”.

However, a spokesman for the Department for Business said that the Government was simply “considering the role” of the RPC as part of a wider desire to overhaul the UK’s regulatory architecture, and that no final decisions have been made.