SMEs shoulder £913m bill to meet compliance needs

Posted on 20 Sep 2013 by The Manufacturer

The Forum for Private Business has revealed that SME manufacturers are being hit by rising consultancy bills as they struggle to stay on the right side of red tape.

New research from the Forum for Private Business suggests SME manufacturers spend a total of £2.5bn a year on compliance, around a third of which is accounted for in fees for external consultants.

On average business owners in smaller manufacturing firms spent approximately £15,379 a year on external consultancy in 2012. This is almost 5% higher than the average UK compliance bill of £14,600.

Manufacturers said they had sought consultant advice on a range of topics including: employment law, health and safety and other industry specific guidance and internal time costs.

Two thirds of respondents, to the Forum’s survey said their consultancy costs for compliance have risen since 2011, when the previous ‘cost of compliance’ research took place.

Those firms that avoid the use of external consultancy spend £11.3bn on compliance via internal time costs, eating up around 40 hours a month of senior management time.

Commenting on the impact of compliance costs, Forum member Ann Pinnington, finance and personnel director at Wrexham-based Hi-Mark Automotive, said: “We are using more and more valuable management resource to attend to red tape.”

Ms Pinnington says that the burden of compliance at Hi-Mark has to be dealt with at director level due to lack of management resource. She says this prevents the business being as outward-looking and aggressive on growth as it would like to be. “We are constantly looking inward and ensuring that we are compliant and doing the best for our employees,” she said. “Our external consultancy costs for quality, employment law, health and safety are rocketing,”

Ms Pinnington continued. “We spend in excess of £15,000 per annum and this excludes the use of accountants, lawyers and financial advisers for the general running of the business.”

The Forum’s Chief Executive, Phil Orford MBE, said his organisation had found manufacturers frustrated with the amount of red tape they have to negotiate on a day to day basis.

“With just under a fortnight to go before October’s common commencement date there is no hiding from the fact that, despite government promises to reduce the time and money spent on red tape, compliance costs continue to hinder job creation and growth,” he said.

“The increasing cost of fines for non-compliance on everything from health and safety to unfair dismissal has made the ongoing support we provide to our members through our helpline and guides all the more important,” Mr Orford continued. The Forum also publishes an annual compliance guide to help smaller firms with compliance. The guide for 2014 will be published in October. Updated sections include:

  • New rates for the National Minimum Wage and other statutory payments
  • Guidance on the amended tribunal rules
  • Information on settlement agreements, pensions auto-enrolment and changes to the rules on redundancy consultation timescales.

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