May 9, 2011 6:17 pm

Trade impediments: tackling a business burden

Following a declaration of war on red tape by the new coalition government last year, the cutting of bureaucratic barriers to doing business was top of many Budget wish-lists ahead of the chancellor of the exchequer’s statement in March.

But while the announcement of a three-year moratorium on new regulation for businesses with fewer than 10 employees was welcomed, concerns remain about the amount of red tape faced by small and mid-sized businesses, especially those doing business abroad.

A poll of its members published by the Federation of Small Businesses last year named red tape as the second-biggest challenge to overcome when exporting, after currency fluctuations.

More worryingly, of the nearly three-quarters of smaller businesses not exporting at the time, only 12 per cent were considering doing so in the future, with bureaucratic rules one of the leading reasons given.

Small and mid-sized companies, it is argued, simply do not have the resources to navigate large amounts of red tape, while government support and the promotion of available help in this area also falls short.

And with almost nine out of 10 exporting small and medium-sized enterprises identifying Europe as their target market, both the FSB and the British Chambers of Commerce say the focus needs to be on removing barriers to the operation of the single market in goods and services in the EU.

“Ministers need to follow through on creating the single market. British businesses should be able to treat the EU as their home market,” says Adam Marshall, director of policy at the BCC.

He points in particular to the inconsistent application of the EU services directive, introduced in December 2009, which was intended to sweep away much of the red tape surrounding companies offering cross-border services in the EU. Services account for 42 per cent of exports among FSB members.

“The UK is the second-biggest supplier of services in the world. The services directive is good news, but it has got to be implemented properly,” Mr Marshall says, adding that the UK has made more progress in this regard than many other member states.

Andrew Cave, chief spokesman for the FSB, says the progress so far has “mainly benefited big business”.

“There is a huge mountain to climb for many small businesses getting their heads around the rules and regulations at the point of entry into a market. The services directive … is supposed to be the biggest red-tape-burning exercise, but [it] has not come to fruition yet,” he says.

In response, the Department for Business, Innovation & Skills admits that “more needs to be done to further improve the single market in services and strip away unnecessary barriers” that hold back business.

“The EU must ensure that the services directive is fully implemented across all member states,” the department says, adding that it has also called on the EU to “review what additional restrictive practices can be removed and reduce the number of regulated professions across the EU”.

Trade bodies, meanwhile, have found a worrying lack of awareness among small and mid-sized businesses about the opportunities made available by the services directive, as well as about the help on offer from government agencies such as UK Trade & Investment.

“UKTI is not even on the radar of smaller businesses,” says Mr Cave, adding that the body needs to do more to promote itself to SMEs.

Jim Watson, founder of Appleby Parva, the luxury goods group, says red tape was the “hardest technical aspect of setting up” his company.

“When we set up, it was specifically to export,” he says. “There are so many rules both in the UK and abroad that you have to adhere to. Every time you dispatch something, you have to fill out a form.”

He continues: “I want a wholesale attitude change [from the government] towards exporting. I am dismayed at the [small] number of companies exporting from the UK. Exporting should be helping us to get out of this [economic] mess”.

Susan Haird, acting chief executive of UKTI, says the body is launching a strategy that will have a stronger focus on SMEs.

“One of the key challenges is getting more companies to expand overseas – only one-third of companies that could export do export, and this is something we need to change. Exporting can open doors to a vast number of new customers and provide genuine benefits for UK-based SMEs,” she says.

New threats, however, are looming on the horizon. High up on the list of concerns for businesses is the upcoming Bribery Act, which comes into force later this summer and which will, among other things, introduce a new offence of failing to prevent bribery.

The BCC’s Mr Marshall says: “It will require businesses to prove they are not engaged in certain types of behaviour. Businesses with 10 employees or fewer are likely to be doing business abroad through an agent or intermediary – and they will be responsible for what they [the agent or intermediary] might do.”

He warns: “It could have a chilling effect on the intention to work overseas.”

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