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Red tape costs small construction firms £1.1 billion

Smaller businesses in the construction sector lose more than £1.1 billion every year because of government red tape, according to the Forum of Private Business (FPB).
Red tape costs small construction firms £1.1 billion
Research carried out by business lobby group has found that Britain's small and medium-sized construction firms spend £1,157m each year complying with legislation.

This figure is based on feedback from the FPB's 25,000 member companies and relates to company time spent, and therefore money spent on government bureaucracy.

Construction firms must spend an average of 37 hours of company time each month on form-filling and paperwork.

Those with nine or less employees spend an average of 34 hours on it, while those with between 10 and 50 employees spend around 28 hours.

Firms with up to 249 workers are spending 131 hours.

Complying with health and safety legislation alone, leaves smaller construction firms £277m out of pocket every 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.

Legislation on employee holidays and any other remaining matters cost £154m.

Legislation surrounding:

Waste and the environment cost £104m
Equality and diversity £25m
ISO and industry standards £111m
Tax £219m
Building and property £139m

Cardiff-based FPB member Terry Scarfe, who runs specialist metal structure manufacturers Amrob Engineering, said filling out paperwork tied in with government regulations was a huge burden on his firm.

'It costs us a fortune just to comply and it's not improving anything - it's just part of this blame culture' said Scarfe.
'As long as you sign a piece of paper to say it's not your fault, it's fine' he added.

Scarfe also warned that the regulations were creating more rogue construction companies which ignore the rules and can afford to undercut responsible firms.

'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', he said.

Construction firms in the North West pay £175m -the biggest bill for overall compliance out of 12 regions identified by the Referendum survey.

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.

Out of four sector headings in the research, based on the UK SIC, the overall cost of compliance for smaller businesses in the construction sector was the third highest. The price was put at £1,157 million for construction, £2,764 million for TRAD businesses and £4,151 million for the services sector.

The FPB's policy representative, Matt Goodman, joined a meeting of the Better Regulation Executive (BRE) on June 26 to call for the government to reduce the red tape burden on smaller businesses.
1 July 2009

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