Small business survey reveals employment law minefield

A leading business pressure group is demanding urgent Government action after a major quarterly survey of 12,000 SMEs revealed that taxation and employment regulations are the main barriers to growth in the sector.

The Small Business Research Trust (SBRT) quarterly report was conducted in partnership with the Forum of Private Business (FPB) between August and November 2004.

The FPB said while it is pleased to see that overall the report reveals the sector to be experiencing moderate growth the majority of SMEs are united in pinpointing the two major difficulties they face. When asked about barriers to growth two thirds of firms cited tax and national insurance. This was followed by employment regulations, 57pc. When the data was analysed by priority the problems differ between micro and small businesses and medium sized firms.

The main problem for micro and small businesses is taxation and national insurance but for medium sized firms employment regulations are far more of an issue with a quarter ranking it as their main priority.

The FPB’s Chief Executive Nick Goulding said the FPB is constantly receiving calls to its Member Information Service’s hotline from frustrated businesses having to grapple with employment regulations.

Mr Goulding said the FPB is expecting the Chancellor to address problems of taxation in his forthcoming budget on March 16.

Main Points from SBRT Quarterly Survey Report

A) Small Business Performance

· Sales turnover increased for 42pc

· Employment largely stable for majority 65pc

· Investment largely stable for majority 66pc

By sector:

The leading sectors in performance by turnover were:

Manufacturing at 47.7pc

Construction at 45.2pc

Wholesale and retail 48.2pc

The worst performing sectors by turnover were:

Hotel/restaurant: 28.6pc

Education/health at 33pc

The leading sectors in investment were:

Manufacturing at 27.3pc

Construction at 21.5pc

Wholesale and retail 23.9pc

By region:

The leading regions which experienced growth were:

Yorkshire & Humberside at 56.2pc

Eastern at 46.5pc

South West 47.5pc

The worst performing regions in terms of experiencing growth were East Midlands and Scotland which both reported just 34pc of firms experiencing growth.

B) Barriers to Growth

During quarter three of 2004 the main challenges to business growth were:

1) Tax/National Insurance 66pc

2) Employment regulations 57pc

3) Business rates 50pc

C) Expectations for the small business sector in the UK

· 45pc of businesses expected sales turnover to increase

By sector:

The sectors which were most confident in growing in quarter four of 2004 were:

Wholesale and retail at 52.1pc

Finance at 51.4pc

Manufacturing at 46.4pc

The sectors least expecting growth were hotel and restaurant 23pc and construction 36pc.

By region:

The regions which were most confident of growing in Quarter four 2004 were:

Yorkshire and Humber at 58.1pc

Eastern at 54.2pc

North West at 51.4pc

The regions with firms reporting least confidence of growth were West Midlands 27pc, London 38pc and Scotland 39pc.

D) Internet usage

· 90pc of businesses are connected to the internet

Of this 90pc:

· 63.8pc have broadband connection

· 35pc have dial up

· 73.4pc have a website

Rank order of e-commerce activity:

1) Obtaining information – 78.9pc

2) External communications – 74.5pc

3) Online banking – 55.9pc

· 49.5pc believe e-commerce has no effect on increasing sales

· 62pc of those businesses who are not connected (9.5pc) believe it is inappropriate for their business.

Women in Business

· 8pc of respondents were women

· 51pc of respondents were both male and female

· 41pc were male

· Most women in business run micro (40.3pc) and wholesale and retail (34.8pc) businesses

Women business owners are out performing the rest of the sample